BAKU, Azerbaijan, September 14. Rystad Energy has assessed the impact of Saudi Arabia's East-West oil pipeline shutdown on the global oil market.
This was reflected in Rystad Energy's review.
According to the review, this shutdown leads to a growth in oil prices.
The review noted that oil prices rose to $108 per barrel following the closure of the Saudi East-West pipeline, leaving the Strait of Hormuz as Saudi Arabia's sole route for transporting large volumes of oil westward.
"The rise in price to $108 per barrel is a clear signal that the market is increasingly pricing in a significant supply contraction. A broader conflict in the Middle East is already creating a premium on oil prices, and the loss of the Saudi East-West pipeline adds another major constraint," said Vice President of Oil Markets at Rystad Energy, Janiv Shah.
According to him, the relatively contained price reaction indicates that the market still expects Saudi Arabia to utilize its stockpiles to maintain exports in the near term. However, the situation could change rapidly if the disruptions last longer than the five-to-seven-day supply buffer allows.
Rystad Energy noted that the immediate market impact should be assessed based on actual flows and loading volumes at Yanbu, rather than the pipeline's design capacity of 7 million barrels per day.
"In early September, oil and condensate loading volumes at Yanbu ranged from 2.6 to 4 million barrels per day. Over the past seven days, the average figure stood at 2.6 million barrels per day.
Assuming a complete halt in pumping, this volume could disappear from the market once the limited oil stocks already at Yanbu have been loaded.
In April, a pumping station on the pipeline was attacked, but full capacity was restored within seven days. However, current satellite imagery indicates more extensive damage at multiple locations, which could result in a longer recovery period for the pipeline.
Saudi Arabia confirmed that the pipeline was shut down as a precautionary measure but did not disclose the extent of the damage, the number of affected pumping stations, or a timeline for resuming operations," the company reported.
Rystad Energy estimated that oil stocks at Yanbu are sufficient for approximately three days of effective exports.
"Depending on stock levels at the time of the pipeline shutdown, this figure could range from two to six days.
Even if the storage tanks were completely full—which is unlikely given the recent recovery in loading volumes—the 24 million barrels would last only about six to eight days.
The pipeline shutdown will also affect flows through the Bab el-Mandeb Strait, the Suez Canal, and the SUMED pipeline. Prior to the attack, shipments from Yanbu could head south through the Bab el-Mandeb Strait toward India and other Asian nations, or north toward Egypt via the Suez Canal or the SUMED pipeline.
Approximately 70% of exports from Yanbu were routed through the Suez Canal and SUMED.
According to the company's assessment, Asian refineries will face the greatest direct impact. Most Chinese, Taiwanese, and Indian buyers were scheduled to receive September oil shipments from Yanbu. Recently, Japanese and South Korean buyers have increasingly been offered oil from Sidi Kerir, as tankers avoid the route through the southern Red Sea," the company reported.
Rystad Energy anticipated delays or reduced supplies to China, Taiwan, and India.
"Japan and South Korea may initially utilize volumes already located at Sidi Kerir; however, their reliance on future deliveries will increase once inflows to SUMED are reduced.
The missing Saudi grades are medium-sour crudes. Rystad Energy identifies Oman, Murban, and Upper Zakum as possible alternatives; however, their loading routes are also affected by the situation surrounding the Strait of Hormuz.
Asian refineries will compete for available oil supplies, including ESPO, WTI Midland, Canadian crude, West African grades, and medium-sour crude from the Atlantic Basin that can be shipped eastward. Mediterranean refineries will compete for CPC Blend, Azeri, and North African grades.
The duration of the disruptions at Yanbu will determine the market's subsequent reaction.
A one-month shutdown could remove about 78–120 million barrels of oil from the export market. A two-month shutdown would reduce export availability by roughly 156–240 million barrels, while a three-month shutdown would put about 230–360 million barrels of potential exports from Yanbu at risk.
The loss of approximately 3 million barrels per day in loadings and exports from Yanbu will significantly impact the global supply-demand balance," the company’s review said.
Rystad Energy estimated that it will take about four weeks for this impact to become apparent, as refineries will continue to receive cargoes already in transit.
In the short term, Rystad Energy projects an upward trend for both benchmark crude grades, with more pronounced gains expected for Dubai crude and the price differentials of competing medium-sour grades.
The company forecasted that prices could begin to decline once oil flows to the west resume or Saudi cargoes begin loading via the Strait of Hormuz.
