East-West pipeline shutdown hits home as Saudi Aramco halts supplies to Indian refineries: Report | Today’s news
The fallout from the closure of Saudi Arabia’s East-West pipeline has hit refiners in India as Saudi state oil company Aramco has reportedly told them they will not receive oil supplies until further notice. According to The Economic Times, Aramco, which has supplied about 9% of India’s oil imports since the start of the war, has halted all supplies to the country through both the Red Sea and the Strait of Hormuz.
The report added that Saudi Arabia has sold some spot cargo to traders who are expected to supply small volumes to Indian refiners via Hormuz. Aramco does not typically sell oil on the spot market and supplies customers under annual contracts.
He added that while Indian refiners can secure alternative supplies, it is likely to be more at a higher price per barrel.
Houthi attack on East-West Pipeline
The East–West pipeline, which stretches over 1,200 kilometers from Abqaiq and Juaymah in Saudi Arabia’s eastern oil fields to the Red Sea port of Yanbu in the west, has been a key oil supply route for Aramco, especially after Iran closed the Strait of Hormuz.
The pipeline, which has the capacity to carry up to 7 million barrels of oil per day, was moving at 4 million to 5 million barrels per day, which represents 4% to 5% of global supply. Last week, it was hit by alleged Houthi drones and reportedly damaged two gas stations, forcing Saudi authorities to temporarily close it.
Although the extent of the damage was not disclosed, various estimates predicted the shutdown would last up to six weeks.
Can India find alternative supplies
According to Bloomberg, India’s state-owned refiners are facing the most significant supply uncertainty in months due to the conflict in the Middle East.
While requirements for September and October are secured, processors face tougher decisions when it comes to November and beyond, the Bloomberg report added.
India has relied heavily on discounted Russian crude and relatively safe futures to the Middle East to reduce import costs. A double squeeze would see its refiners compete for barrels from further afield, cutting into margins at state-run fuel retailers, which are reluctant to cut operating rates given their domestic mandate and already sell gasoline, diesel and cooking gas below cost.
Top Indian refiners are already leaning on the US, Brazil, Canada, Venezuela and Africa to diversify supplies, he added.
The shutdown did not only affect Indian refineries. According to a Reuters report, Aramco has also cut crude oil supplies to Europe.
Oil trading and shipping sources told Reuters that Saudi Arabia had informed European customers that some September crude loadings would be canceled and crude loading at the Red Sea port of Yanbu had been suspended.
