Key Takeaways
- Saudi Arabia's major pipeline to the Red Sea is out of service, potentially reducing global oil exports by 4%.
- Yanbu storage capacity is expected to run out in five to seven days without pipeline repairs.
- World oil supply is set to decline by 5.7 million barrels per day this year.
Saudi Arabia faces a significant challenge as its major pipeline to the Red Sea remains out of service, threatening a loss of up to 4% of global oil supply, according to industry sources.
Since drone attacks forced the shutdown of the pipeline on Friday, Saudi Arabia has not provided full details on the extent of the damage or the timeline for repairs.
Industry sources estimate that the pipeline could take up to five to six weeks to repair, while others suggest it could resume partial operations sooner.
Without the pipeline, Yanbu, a key port on the Red Sea, now has stocks to maintain 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 Egypt’s ports of Ain Sukhna on the Red Sea and Sidi Kerir on the Mediterranean, a fourth source said.
Yanbu storage capacity stands at around 35 million barrels, with Ain Sukhna and Sidi Kerir able to store 18 million and 20 million barrels respectively, according to industry estimates.
Stocks are not full and will ultimately run out without the east-west pipeline resuming operations, the four sources said.
The International Energy Agency reported that Saudi Arabia’s oil supply has already fallen to a more than three-decade low in August, with reduced flows via the Strait of Hormuz and the Red Sea.
World oil supply is set to decline this year by 5.7 million barrels per day, or about 6%, according to the IEA, which coordinates Western energy policies.
In addition to the pipeline attack, Houthi fighters in Yemen have seized an island in the mouth of the Red Sea, further threatening Saudi oil shipments.
