Saudi Arabia Restarts East-West Oil Pipeline
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Oil Price
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Saudi Arabia has restarted its critical East-West oil pipeline, capable of handling 4 million barrels per day, reducing its dependence on the strategic Strait of Hormuz. The restart is proceeding at limited capacity as Saudi Aramco works to restore full flows, with markets already responding to the prospect of restored supply routes.
Saudi Arabia has restarted its East-West oil pipeline, restoring at least some flow through the 4-million-barrel-per-day route that had become the kingdom’s main escape hatch around the Strait of Hormuz.
The pipeline is running at a low rate for now, according to Reuters sources, with Aramco working to return flows to roughly 4 million bpd. A full restart could still take weeks. One cargo was scheduled to load at the Red Sea port of Yanbu Tuesday for China.
Oil traders didn’t wait for full capacity. Brent saw a temporary dip of more than $2 per barrel Tuesday to a two-week low, trading around $98, while WTI dropped below $92. Prices began rebounding slightly later in the morning. The Saudi restart landed alongside an Iranian proposal to reopen the Strait of Hormuz within seven days if the United States begins easing military pressure and its blockade of Iranian ports.
The East-West pipeline had been rerouting about 4 million bpd across Saudi Arabia to Yanbu before drone attacks forced its shutdown earlier this month. Without it, Aramco pushed more crude back toward the Persian Gulf, selling tens of millions of barrels for movement through Hormuz and ship-to-ship transfers near Oman.
That workaround helped Asian buyers but Aramco was telling European term customers last week that October crude allocations would be zero after the pipeline outage interrupted supplies normally moved from Yanbu through Egypt’s SUMED system to the Mediterranean.
Traders are already preparing for that route to reopen. Reuters sources said tankers are being moved toward Egypt’s Port Said and Sidi Kerir for ship-to-ship transfers as Saudi flows return.
The physical oil market still has plenty of damage to unwind. Saudi pipeline flows remain well below normal, Hormuz traffic is still constrained, and diesel markets remain tight after refinery disruptions in Russia and the Middle East.
By Julianne Geiger for Oilprice.com
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The pipeline is running at a low rate for now, according to Reuters sources, with Aramco working to return flows to roughly 4 million bpd. A full restart could still take weeks. One cargo was scheduled to load at the Red Sea port of Yanbu Tuesday for China.
Oil traders didn’t wait for full capacity. Brent saw a temporary dip of more than $2 per barrel Tuesday to a two-week low, trading around $98, while WTI dropped below $92. Prices began rebounding slightly later in the morning. The Saudi restart landed alongside an Iranian proposal to reopen the Strait of Hormuz within seven days if the United States begins easing military pressure and its blockade of Iranian ports.
The East-West pipeline had been rerouting about 4 million bpd across Saudi Arabia to Yanbu before drone attacks forced its shutdown earlier this month. Without it, Aramco pushed more crude back toward the Persian Gulf, selling tens of millions of barrels for movement through Hormuz and ship-to-ship transfers near Oman.
That workaround helped Asian buyers but Aramco was telling European term customers last week that October crude allocations would be zero after the pipeline outage interrupted supplies normally moved from Yanbu through Egypt’s SUMED system to the Mediterranean.
Traders are already preparing for that route to reopen. Reuters sources said tankers are being moved toward Egypt’s Port Said and Sidi Kerir for ship-to-ship transfers as Saudi flows return.
The physical oil market still has plenty of damage to unwind. Saudi pipeline flows remain well below normal, Hormuz traffic is still constrained, and diesel markets remain tight after refinery disruptions in Russia and the Middle East.
By Julianne Geiger for Oilprice.com
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Source: Oil Price
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