If the shutdown of critical pipelines in Saudi Arabia continues, there could be a 4% gap in global oil supply

1. Oil buyers and traders in Saudi Arabia have stated that if the east-west pipeline connecting the eastern oil fields to the Red Sea coast cannot resume operations within a few days, the country’s exportable oil inventories will be depleted, which would in turn reduce global oil supply by around 4%. The pipeline was forced to shut down after a drone attack last Friday, and authorities in Riyadh have yet to disclose complete details regarding the extent of the damage and the expected duration of the outage. Estimates on repair time vary among sources, with some suggesting it could take five to six weeks, while others believe repairs may be quicker with limited oil transport partially resuming during maintenance. The Saudi government’s press office and Ministry of Energy have not responded to requests for comment.2. As the world’s largest oil exporter, Saudi Arabia originally used this pipeline to reroute around 4 million barrels of crude oil per day to Yanbu Port on the Red Sea, accounting for about 4% of global supply. However, three industry sources with knowledge of Saudi exports revealed that, following the pipeline shutdown, current inventories at Yanbu Port can sustain only five to seven days’ worth of exports. A fourth source said that Saudi Arabia can also supply its customers for a few days via Ain Sukhna Port on Egypt’s Red Sea coast and Sidi Kerir Port on the Mediterranean coast. Industry estimates place Yanbu’s storage capacity at around 35 million barrels, while Ain Sukhna and Sidi Kerir hold around 18 million and 20 million barrels respectively. All four sources stated that these inventories are not at capacity and will eventually be depleted if the pipeline cannot be restored.3. Last Friday, the International Energy Agency noted that, due to reduced oil shipments via the Strait of Hormuz and the Red Sea, Saudi Arabia’s crude oil supply fell in August to its lowest level in over 30 years. The agency projects that global crude oil supply will decrease by 5.7 million barrels per day this year, a drop of about 6%. In addition to the pipeline attack, Yemen’s Houthi militants, who have previously threatened Saudi oil transport, also captured an island at the entrance to the Red Sea last Friday. Before the outbreak of war, crude oil supply from the Middle East was about 22 million barrels per day; according to industry sources, oil shipments via the Strait of Hormuz have now dropped to 6–9 million barrels per day. Last week, Saudi Arabia informed OPEC that its crude oil production had fallen from 10.9 million barrels per day before the outbreak of war in February to 6.2 million barrels per day in August.4. If Saudi oil supply declines further, it will intensify the global shortage. This situation has already driven global fuel prices to record highs, fueled rising inflation, and pushed US Treasury yields to their highest levels since the 2008 financial crisis.