Saudi Pipeline Outage Puts 4% of Global Oil Supply at Risk

Saudi Arabia risks losing up to 4% of global oil supply if it cannot restart its main east-west pipeline within days, according to oil buyers and traders. The pipeline, which normally carries about 4 million barrels per day to the Red Sea port of Yanbu, was shut on Friday after drone attacks.

Storage at Yanbu can sustain exports for only five to seven days, three industry sources said. A fourth source added that Saudi Arabia also holds stocks at Egypt's Ain Sukhna on the Red Sea and Sidi Kerir on the Mediterranean, enough to supply customers for several days. Yanbu's storage capacity is estimated at around 35 million barrels, while Ain Sukhna and Sidi Kerir can hold 18 million and 20 million barrels respectively. The sources cautioned that stocks are not full and will eventually run out without the pipeline.

Riyadh has not disclosed the full extent of the damage or how long repairs will take. Estimates vary: one source suggested the pipeline could be offline for five to six weeks, while another said it might be fixed sooner and could resume partial pumping during repairs. Saudi government and energy ministry officials did not immediately respond to requests for comment.

The outage compounds an already severe global supply crunch. The International Energy Agency said on Friday that Saudi oil supply fell to a more than three-decade low in August, and world oil supply is set to decline by 5.7 million barrels per day this year, or about 6%. The supply squeeze has driven fuel prices to record highs, fuelled inflation worldwide and pushed U.S. bond yields to their highest since the 2008 financial crisis.

For the past six months, the east-west pipeline had allowed Saudi Arabia to avoid the worst effects of the wartime closure of the Strait of Hormuz, which has crippled exports from its neighbours. Before the war, the Middle East supplied around 22 million barrels per day; flows through Hormuz have now slowed to just 6 million to 9 million barrels per day, industry sources say. Saudi Arabia told OPEC last week that its production had dropped to 6.2 million barrels per day in August from 10.9 million barrels per day in February.

Separately, Houthi fighters in Yemen who have threatened Saudi oil shipments seized an island at the mouth of the Red Sea on Friday, adding to concerns over the security of regional energy routes.