Saudi Arabia restarts East-West pipeline

Saudi Arabia has restarted its East-West crude pipeline after a nine-day shutdown caused by drone attacks, restoring the route used to bypass the Strait of Hormuz, Reuters reported on September 22, citing three sources briefed on the matter.

The line is the kingdom's principal escape from a Gulf effectively closed to tanker traffic since the US and Israel attacked Iran on February 28, carrying about 4mn barrels a day to the Red Sea port of Yanbu, roughly 4% of world supply. Its loss had cut Saudi exports to 2.4mn b/d in August, the lowest since 2013, and forced Riyadh into ship-to-ship transfers off Oman to reach Asian buyers.

The pipeline was initially running at a low rate, two sources said, while Saudi Aramco sought to restore flows to about 4mn b/d. One security source estimated a full resumption could take weeks.

Brent crude futures fell more than $2 a barrel to their lowest since September 8 as the restart drew selling, traders said.

Crude supply to Aramco's Red Sea refineries will also resume. A cargo bound for China was scheduled to load at Yanbu later on September 22, and tankers were being moved to Egypt's Port Said for ship-to-ship transfers and to Sidi Kerir ahead of renewed Saudi loadings, two trading sources said.

Drone attacks on September 11 shut the line and halted crude loadings at Yanbu. Satellite imagery later showed three pumping stations had been damaged, one more than first reported. Saudi authorities said the drones were launched from Iraq's Maysan province, and Riyadh vowed a decisive response after the latest in a series of strikes on its oil installations, some answered by joint Saudi-US raids on militia positions.

The episode illustrates how little slack the region's bypass infrastructure carries. Although Gulf networks have a theoretical capacity above 12mn b/d, only about 5mn b/d is operationally available, leaving roughly 10mn b/d of the region's 15mn b/d of exports without an evacuation route during a sustained Hormuz closure. Saudi Arabia was assessed in March as having about a month of cover from bypass capacity and storage, with two months far harder.

Yanbu shipments averaged 4.4mn b/d over five days to March 24, against a Saudi target of 5mn b/d through Red Sea ports, with some 56mn barrels of Saudi crude then stranded on tankers inside the Gulf.

The Red Sea outlet carries its own exposure. Yemen's Houthis, who have since taken control of the country's entire Red Sea coast, have said they intend to extend their blockade of Saudi ports to Jeddah and Yanbu, and struck the Yanbu terminal with missiles and drones on September 20.