A key pipeline used for Saudi Arabia’s oil exports has been damaged in a Houthi attack. If this Red Sea-bound line cannot be restarted quickly, the country faces a severe crisis regarding its oil exports. International energy traders fear that this could cause a sudden drop of nearly four percent in the global oil supply, potentially triggering a major new energy crisis worldwide. This report comes from the news agency Reuters.
Saudi Arabia’s vital East-West oil pipeline has been shut down since Friday following a drone attack. Riyadh has not disclosed the extent of the damage or the time required for repairs. Sources indicate that full repairs could take five to six weeks, though efforts are underway to partially resume oil supplies through emergency repairs.
Saudi Arabia had become increasingly reliant on this pipeline following disruptions to oil exports via the Strait of Hormuz. Through this route, the country exported approximately 4 million barrels of oil daily via the Red Sea port of Yanbu. Currently, Yanbu holds only about five to seven days’ worth of oil reserves. Supplies could also be maintained for a few more days from two Egyptian ports; however, these reserves would quickly be depleted if the pipeline is not fully restored.
The International Energy Agency has reported that Saudi oil supplies fell to a three-decade low in August. This tightness in the global oil market has already driven up prices. Simultaneously, concerns have arisen regarding inflation and bond yields reaching multi-year highs in the United States and other nations. Before the conflict began, approximately 22 million barrels of oil were supplied daily from the Middle East. Due to the current impasse, the flow through the Strait of Hormuz has dropped to between 6 million and 9 million barrels. Saudi Arabia’s daily oil production has also declined significantly compared to previous levels.
