Out of Action Saudi Pipeline Brings New Risk for Global Oil Supplies
New Delhi: Four per cent of global crude supplies are at risk until Saudi Arabia repairs an oil pipeline, out of action since Friday (September 11). The pipeline was struck by drones during the ongoing West Asia conflict, leaving the port of Yanbu on the Red Sea, to which it normally supplies, exporting only what is already in storage.
Yanbu storage capacity stands at around 35 million barrels, according to industry estimates, with Ain Sukhna and Sidi Kerir able to store 18 million and 20 million barrels respectively, Reuters reports.
Reuters said, citing four industry sources speaking separately, that the pipeline may take four to five weeks to repair, that supplies might partially resume sooner as parts of the pipeline are repaired, and expressed concerns about the fallout of both situations on the availability of oil.
Saudi Arabia itself has not formally announced when the pipeline would return to normal functioning. This is the first instance of the 1,200-km pipeline, known as the east-west pipeline, being struck since the conflict between the United States-Israel and Iran began in February this year. The attack on the Saudi pipeline is understood to be a Houthi action.
Saudi oil supplies already fell to a more than three-decade low in August on reduced flows via the Strait of Hormuz and the Red Sea, the International Energy Agency said on Friday, Reuters reports. The IEA also said there would be 6% decline (5.7 million bpd) in global oil supplies this year.
There are more warnings from Yemen-based Houthis of strikes against Saudi shipments traversing via the Red Sea, an alternative route to the Hormuz Strait, and accessed by pipelines.
Saudi Arabia told OPEC last week that its oil production had dropped to just 6.2 million bpd in August from 10.9 million bpd in February before the start of the war, reports Reuters. Saudi Arabia has used the route to move around 4 million barrells of oil per day.
Meanwhile, a merchant vessel was struck in the Strait of Hormuz on Sunday killing one person and injuring three, Iranian authorities said as escalation in the region continues.
At the same time as the Houthi takeover of Yemen’s Red Sea coastline, the Yemeni air force targeted its vehicles in the Dhubab and al-Makha areas, and claimed to have recovered key sites.
Oil prices have surged again in the wake of these developments and the uncertainty of war spreading. Brent crude is above $107 a barrel, crossing the $100 threshold earlier but opening on Monday at 3% higher.
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