Saudi Arabia is facing growing challenges in exporting its oil after attacks forced the closure of a key pipeline, while Iran and its allies have tightened their grip on the kingdom’s main maritime routes, the AFP reported.
The world’s largest oil exporter last week shut its East-West pipeline, a roughly 1,200-km link connecting oil fields in eastern Saudi Arabia with the Yanbu terminal on the Red Sea. The move followed attacks on Saudi oil facilities originating from Iraq, where pro-Iran armed groups are active.
The pipeline had become increasingly important after Iran blocked the Strait of Hormuz at the start of the Middle East war, disrupting Saudi Arabia’s main oil export route.
However, Saudi Arabia’s alternative route through the Red Sea is also under pressure. Houthi attacks from Yemen and a maritime blockade targeting vessels serving Saudi ports have sharply reduced shipments through the Bab al-Mandab Strait, AFP reported.
Saudi Arabia turns to longer oil routes
Saudi Arabia can still move some crude to Yanbu and then export it through Egypt, either via the Suez Canal or through the Ain Sokhna terminal, where another pipeline carries oil to the eastern Mediterranean.
Saudi crude shipments through the Suez Canal rose to nearly 500,000 barrels per day by the end of July, compared with almost zero in June, according to commodities data firm Kpler, cited by AFP.
By combining the Suez Canal and Egypt’s Sumed pipeline, Saudi Arabia could theoretically bypass Bab al-Mandab and move up to 3.4 million barrels of crude a day, Kpler estimates.
However, the route has significant limitations. For oil headed to Asia, Saudi Arabia’s biggest export market, tankers would need to travel through the Mediterranean and then around Africa, adding weeks to the journey.
Some crude is also being shipped through the Strait of Hormuz despite the risks. Iran has repeatedly attacked commercial vessels using the waterway.
Tankers have switched off their tracking systems and ship-to-ship transfers are being used to move crude out of the Gulf. However, volumes remain highly volatile and are averaging only about half their pre-war levels, Verisk Maplecroft said in the report.
Saudi oil exports fall under pressure
The East-West pipeline was carrying a much larger share of Saudi exports after the Strait of Hormuz was blocked.
Saudi shipments through Yanbu had increased fivefold since the start of the war to almost 4 million barrels per day, Kpler data showed, the report said. But after the Houthis announced a maritime blockade against Saudi Arabia in July, exports through the Bab al-Mandab Strait fell to almost zero by August.
The closure of the East-West pipeline has now exposed another vulnerability in Saudi Arabia’s efforts to keep its oil exports flowing.
“The East-West pipeline is a critical energy artery for Saudi Arabia, especially within the current geopolitical context,” Robert Mogielnicki of the Arab Gulf States Institute told AFP.
Torbjorn Soltvedt, a Middle East analyst at Verisk Maplecroft, said the pipeline attack showed that infrastructure designed to protect Gulf oil exports was not a “silver bullet”.
Oil prices face fresh pressure
The disruption is already affecting global oil markets. Brent crude jumped to nearly $110 a barrel after the announcement of the pipeline closure, while average US diesel prices reached a record high of just under $6.27 a gallon on Tuesday, the report added.
The Ukraine war is also contributing to pressure on diesel prices.
“The global economy will also feel the heat from upward pressure on oil prices resulting from ongoing tensions in and around the region's two choke points and damaged energy infrastructure,” Mogielnicki said.
Saudi Arabia has also said its oil production fell last month to its lowest level since 1990, Swissquote analyst Ipek Ozkardeskaya wrote in a note cited by AFP.
Repairs to the East-West pipeline could prove difficult as the conflict disrupts maritime transport and delays equipment imports, Verisk Maplecroft said.
Soltvedt said the situation was creating a feedback loop: attacks are reducing Saudi oil exports, while disruptions to trade are making it harder to repair infrastructure needed to restore those exports.
For Saudi Arabia and other Gulf producers, the combination of disruptions around the Strait of Hormuz, Bab al-Mandab and critical energy infrastructure is putting additional pressure on oil flows as the regional conflict continues.
