Saudi Arabia-Houthi clash: Traders expect Riyadh to run out of oil supplies soon if work on East-West pipeline does not resume | Today’s news

As tensions in the Middle East escalate and the wider region plunges into renewed confrontation, Saudi oil buyers and traders expect Riyadh to run out of oil for export if the country does not restore operations on its main pipeline to the Red Sea within days.

According to a Reuters report, a pipeline failure could result in the loss of up to four percent of global oil supplies. Deeper cuts to Saudi oil flows could exacerbate a global supply shortage that has already driven fuel prices to record highs, fueled global inflation and pushed U.S. bond yields to their highest point since the 2008 financial crisis.

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Currently, crude oil stocks at the Red Sea port of Yanbu are enough to sustain exports for about five to seven days, Reuters reported, citing industry sources. Furthermore, if the pipeline remains closed, these reserves could eventually be depleted.

Saudi Arabia shut down the east-west gas pipeline due to the attacks

The kingdom was forced to shut down its massive east-west oil pipeline on September 11 after the Iranian-backed Houthis escalated drone attacks on Saudi Arabia. While Riyadh did not reveal full details of the extent of the damage or how long the route would remain offline, sources told Reuters that repairs could take at least five to six weeks. Another source noted that the pipeline could be repaired sooner and that partial pumping could resume as repairs continue.

Over the past six months, the pipeline across the Arabian Peninsula has helped shield Saudi Arabia from the worst effects of the wartime closure of the Strait of Hormuz, which has severely disrupted exports from neighboring countries.

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The kingdom, which is also the world’s largest oil exporter, has used the East-West Pipeline to divert about four million barrels per day (bpd), or about four percent of global supply, to the Red Sea port of Yanbu. However, with the pipeline out of service, the port only has supplies for five to seven days.

Saudi Arabia also has enough oil stored at Egypt’s Red Sea port of Ain Sukhna and the Mediterranean port of Sidi Kerir to continue supplying customers for several days.

Saudi oil stocks offer temporary relief

According to industry estimates, Saudi oil storage capacity at the port of Yanbu is currently around 35 million barrels, while Ain Sukhna has a capacity of 18 million barrels and Sidi Kerir has a capacity of 20 million barrels. The report said these reserves are not at full capacity and will eventually be depleted without resuming key pipeline operations.

Saudi oil supply is falling

In August, oil production in Riyadh fell to the lowest level in more than three decades as reduced flows through the Strait of Hormuz and the Red Sea weighed on inventories, the International Energy Agency (IEA) said on September 11. The agency, which is responsible for coordinating energy policies among Western countries, expects global oil supplies to fall by 5.7 million barrels a day this year, or about six percent.

Meanwhile, Houthi fighters in Yemen, who have threatened Saudi oil supplies, seized an island at the entrance to the Red Sea on September 11, adding to fears of a regional supply disruption.

Before the war, the Middle East region supplied 22 million barrels of oil per day. Oil flows through the Strait of Hormuz, a key waterway that has been effectively closed since the start of the US-Iran war in late February, have slowed to between six and nine million bpd, the report added, citing the sources.

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Last week, Saudi Arabia told the Organization of the Petroleum Exporting Countries (OPEC) that its oil production fell to 6.2 million barrels a day in August, compared with 10.9 million barrels a day in February, before the US and Israel launched a joint operation against Iran.

If Saudi Arabia does not resume exports soon due to the extended pipeline shutdown, the move could further pressure global oil supplies and leave markets vulnerable to further price pressures.