Saudi Aramco has informed at least two European refining customers that they will receive no crude deliveries next month, following a drone attack on the kingdom's key East-West pipeline, according to Bloomberg. The decision applies to all European buyers under long-term contracts, effectively cutting off the region's direct Saudi supply for October.
Pipeline outage deepens
The 1,200-kilometer East-West pipeline, which can carry up to 7 million barrels per day from eastern oil fields to the Red Sea port of Yanbu, has been shut since September 10. Initial assessments indicated one pumping station was damaged, but satellite imagery and industry sources cited by Reuters on September 17 revealed that three stations were actually hit. Repair timelines range from a partial restart within days to a full recovery taking five to six weeks.
The pipeline had become Saudi Arabia's critical alternative export route after Iranian attacks disrupted tanker traffic through the Strait of Hormuz. With this artery now offline, the kingdom is rerouting some volumes through Hormuz, but the loss of the Red Sea outlet has tightened European supply significantly.
European refiners scramble
European refiners typically receive Saudi crude via Egypt's Mediterranean port of Sidi Kerir, linked to the Red Sea by pipeline. That route is now cut, forcing buyers to seek replacement barrels from the North Sea and other sources. Poland's Orlen, which relies on Saudi Arabia for roughly 40% of its crude feedstock across three refineries, has issued more than ten tenders since last Friday. At least three European refiners have already had September cargoes canceled or delayed as far out as November, with two more expected to receive similar notices, according to Argus.
European OECD countries imported 577,000 barrels per day of Saudi crude in June, per the International Energy Agency's monthly Oil Market Report. The sudden halt will require significant logistical adjustments, and the physical market is already showing stress: some European crude cargoes are trading above $130 per barrel, with North Sea Forties reaching $136.75, even as futures prices remain more contained.
Oil price reaction
Brent crude climbed as high as $108 a barrel this week before easing to around $104.84 by Friday morning, while WTI traded near $103. The repair hopes have provided some support, but the market remains sensitive to further escalation. Consultancy Rapidan Energy expects Saudi crude exports to fall by 400,000 barrels per day this month due to the outage, partly offset by higher flows through Hormuz.
"Risk remains skewed toward a larger disruption if the pipeline outage extends past September or Iran, the Houthis, or other proxy groups escalate attacks," the firm told clients in a note. The limits of Plan B are becoming evident as the kingdom's ability to reroute is constrained.
Broader energy shock
The disruption adds to a broader energy shock already unfolding this month. Elevated oil prices are feeding into inflation concerns, which helped push the Federal Reserve to raise interest rates for the first time since 2023. The tightening supply is also affecting other markets, with crude topping $106 in recent sessions. As European buyers compete for alternative barrels, the global oil market faces a period of heightened volatility and supply uncertainty.
This article is for informational purposes only and does not constitute financial advice.
