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Saudis in process of starting up key East-West oil pipeline
A restart will bring some relief to a market that has been short of supply
| Updated:
(Bloomberg)
Key Takeaways:
- Saudi Arabia began restarting its East-West oil pipeline and aims to restore exports via Yanbu later this week, people familiar with the matter said.
- The pipeline outage tightened crude supplies, disrupted Saudi exports and helped push European benchmark oil prices above $130 at one point.
- Saudi Aramco is bypassing damaged infrastructure to restore flows and seeks to return the pipeline to full capacity in about six weeks.
Saudi Arabia is in the early stages of starting up a vital oil pipeline that has enabled Riyadh to bypass the Strait of Hormuz after the conduit was halted earlier this month, people familiar with the matter said.
The kingdom is building pressure on the line and aiming for a meaningful restart of flows by Sept. 26, one of the people said, asking not to be identified because the information isn’t public. It’s also targeting a resumption of exports later this week, another person said. Multiple oil traders said there were already signs of tankers arriving at the port of Yanbu, from where the piped supply is exported.
Saudi Aramco and the nation’s oil ministry didn’t respond to requests for comment.
A restart will bring some relief to a market that’s been short of supply, with crude extending declines below $100 a barrel on Sept. 22.
When the pipeline was shut down, the kingdom pivoted its exports back to the Persian Gulf, with millions of barrels seen loading at the giant Ras Tanura terminal in recent days.
The resumption of the East-West line will allow Aramco to pick up exports again from the Red Sea port of Yanbu, which it has been using during the war for the bulk of its shipments as the Strait of Hormuz remains heavily disrupted. Still, risk remains on that route as the Yemen-based Houthi militants have continued their campaign by striking Saudi infrastructure.
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Since the pipeline was hit by drones launched from Iraq, state-run Saudi Aramco had been racing to bypass a damaged pumping station along the route to help restore flows partially, and was seeking to return the link to its full capability in about six weeks, Bloomberg has reported. The pace of the ramp-up will depend on how quickly Aramco can repair the damaged station.
The impact of the pipeline’s closure has rippled through markets. Saudi Aramco told at least two European refiners that they won’t be allocated any crude in October under long-term agreements, according to people familiar with the matter. Poland’s Orlen SA has already been hunting for replacements, helping drive up prices of European oil grades. Dated Brent, the benchmark for real-world barrels in the continent, topped $130 at one point.
