Kingdom of Saudi Arabia’s oil company, Saudi Aramco has halted crude oil supplies to some European refining customers in October.
Bloomberg News reported on Friday, citing people familiar with the matter, that the cancellation comes after an attack on Saudi Arabia’s key pipeline to the Red Sea.
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European refiners typically buy Saudi crude under term contracts that guarantee monthly supplies, but Aramco has informed customers that next month’s deliveries will not proceed, the report said.
At least two European refiners were told their October allocations are zero, Bloomberg reported Friday. People familiar with the decision said it applies to all European term buyers.
The East-West pipeline had been moving 4 million to 5 million barrels per day across Saudi Arabia to Yanbu, bypassing the Strait of Hormuz. Crude from Yanbu could move through Egypt’s SUMED system to Sidi Kerir on the Mediterranean, giving European refiners access to Saudi barrels without entering the Gulf.
The disruption has prompted customers including Poland’s Orlen to seek alternative crude supplies, with traders saying the refiner bought North Sea grades to replace disrupted Saudi imports.
Aramco is working to partially restart the pipeline within days and return it to full capacity within six weeks, Bloomberg reported, citing a person familiar with the matter.
Oilprice.com reports that Aramco has since sold about 60 million barrels from its Persian Gulf export terminal at Ras Tanura for September and October loading. Those barrels will move through Hormuz and undergo ship-to-ship transfers near Sohar, Oman. The program puts roughly 1 million to 1.5 million bpd of Saudi Gulf exports back into the market—with buyers in China, South Korea, India and Japan, and decidedly not Europe.
However, Europe does not benefit from this arrangement as Gulf barrels headed west have to clear Hormuz and the Red Sea, where shipping has also come under attack, or spend almost five weeks sailing around Africa.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
