Attacks on Saudi pipeline threaten global oil supply

A further drop in Saudi flows will worsen global supply shortages, which have already driven global fuel prices to record levels, spurred inflation around the globe and driven U.S. Treasury bond yields to their highest levels since the 2008 financial crisis.

Since drone strikes forced Saudi Arabia to shut down its massive East-West oil pipeline on Friday, Riyadh has not provided full details on the extent of the damage or how long the route will remain out of operation.

Sources who spoke to Reuters gave varying estimates, with one saying repairs to the damage could take five to six weeks, while another said the problem could be fixed sooner and pumping could partially resume while repairs are underway.

Saudi Arabia's government media office and energy ministry did not immediately respond to requests for comment. Over the past six months, the desert-crossing oil pipeline on the Arabian Peninsula has spared the principality the heaviest impact of the war-related closure of the Strait of Hormuz, an event that has crippled its neighbors' exports.

However, with infrastructure out of service, Yanbu now has stocks to sustain exports for just five to seven days, according to three industry sources familiar with Saudi exports. Saudi Arabia also has stocks to supply customers for several days from the Egyptian ports of Ain Sukhna on the Red Sea and Sidi Kerir on the Mediterranean, a fourth source said.

Yanbu's storage capacity is around 35 million barrels, according to industry estimates, with Ain Sukhna and Sidi Kerir capable of storing 18 million and 20 million barrels, respectively. Stockpiles are not full and will eventually run out if the East-West pipeline does not resume operations, the four sources said.

Saudi oil supplies already fell to the lowest level in more than three decades in August due to reduced flows via Hormuz and the Red Sea, the International Energy Agency (IEA) said on Friday (11).

World oil supply will fall by 5.7 million barrels of oil per day (bpd) this year, or about 6%, said the IEA, which coordinates Western energy policies. In addition to the pipeline attack, Houthi fighters in Yemen, who have threatened Saudi oil shipments, seized an island on Friday at the entrance to the Red Sea.