Last week, Saudi Arabia halted its main East-West oil pipeline following drone strikes near the Iraqi border that injured workers. In response, Japanese refiners are scrambling to secure crude from Oman. The shutdown has left Asian refiners without any official word on when repairs might wrap up, while the U.S. Energy Secretary’s assertion that the pipeline could resume service within days has yet to be confirmed.
After the Middle East conflict began and the Strait of Hormuz shut down shipping traffic, the Kingdom found a way around it using the East-West pipeline, which runs for 750 miles. Through that conduit, Saudi Arabia has largely shifted its crude loadings from the Gulf’s western ports to the Red Sea port of Yanbu.
The Drone Attacks That Shut Down the Pipeline
Saudi Arabia had to temporarily shut down its East-West oil pipeline late last week as a result of drone strikes launched from Iraqi territory near the Iranian border on Thursday. The precautionary closure came after the attacks caused several injuries, according to the world’s leading crude oil exporter.
The kingdom has not released any official statement about how much damage was done or when repairs will be completed. Beyond shutting down operations and denouncing the strikes, Saudi Arabia has provided no additional information.
According to two regional officials who spoke with The Associated Press about the situation, fixing the damage could require anywhere from three to five weeks.
What the U.S. Energy Secretary Said
On Tuesday, U.S. Energy Secretary Chris Wright said the pipeline could be back into service within days. No further information from Saudi Arabia has confirmed his assertion.
The discrepancy between Wright’s timeline and the AP’s three-to-five-week estimate is notable. Without official confirmation from Saudi Arabia, neither figure can be treated as settled.
Asian Refiners Wait on Answers
Traders involved in the communication told Bloomberg on Monday that at least four Asian refiners still haven’t heard back from Saudi Arabia. Two of those refiners plan to collect their cargoes at Yanbu as planned, so long as there is no word on delays in the coming hours and days, according to Bloomberg’s trade sources, who asked not to be named.
Asian refiners face a core difficulty: they cannot clearly foresee the size or the length of the disruption they are expected to prepare for, which makes it hard for them to make sound plans.
Why Japanese Refiners Turned to Oman
Traders with knowledge of the purchases told Bloomberg on Wednesday that some Japanese refiners moved quickly this week to buy Oman’s crude for earlier loadings following the pipeline shutdown. The purchases come as Japanese refiners look to secure crude supplies.
There is no official timetable from Saudi Arabia, so Japanese refiners are securing crude from other sources as a practical answer to uncertainty, safeguarding their production plans.
The Open Timeline
Asian refiners are under immediate pressure to find replacement crude supplies due to the shutdown, and their scramble for Oman’s crude shows how quickly they are responding to that need.
There is still no settled position from Saudi Arabia on the scope of the destruction or when the fixes will be completed. The kingdom has yet to make any further public statements about either matter beyond its first announcement.
“By Tsvetana Paraskova for Oilprice.com”
How fast the market rights itself depends on the repair timeline. Should the pipeline come back within days, as Wright suggested, the rush to secure Oman’s crude could turn out to be brief.
The pipeline will not be fixed soon, and if the AP’s estimate holds up, refiners face a prolonged stretch of uncertainty. They will need to look elsewhere for crude oil while the repairs are underway, and that search could last for weeks.
Until Saudi Arabia gives its word, the wisest course for Asian refiners is to sit tight and wait. The safer path before that moment arrives is securing crude from other sources.
The circumstance serves as a reminder of how carefully observers of global oil markets track Saudi Arabia’s infrastructure. The next few weeks will show whether Wright’s confidence, with the AP’s estimate standing as the other measure against which outcomes will be judged.
Here is a quick summary of the key points:
- Drone strikes from Iraqi territory near the Iranian border on Thursday caused injuries and prompted the precautionary closure of the pipeline.
- Two regional officials estimate repairs could take three to five weeks.
- U.S. Energy Secretary Chris Wright said the pipeline could be back into service within days.
- At least four Asian refiners have not heard back from Saudi Arabia.
- Some Japanese refiners are securing crude from Oman as a practical answer to uncertainty.
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