Saudi Aramco has announced that it will supply additional crude oil to European refiners for the months of October and November. This decision follows Aramco's earlier notification to its customers that no oil under October contracts would be received, due to an attack on the East-West pipeline in the country.
Details of Oil Supply
Aramco has offered spot cargoes for late October at a discount to its official selling price. These cargoes are available from the port of Yanbu on the Red Sea or Sidra on the Mediterranean coast of Egypt. Following this offer, Aramco has also provided additional cargoes for November. European refiners will also fully benefit from their November contractual allocations, which is a significant improvement compared to the cancellation of October contracts.
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Saudi Oil Production and Its Impact on the Market
Aramco had previously informed European refiners that October contractual cargoes would not be shipped due to an attack that shut down the East-West pipeline. Now that this pipeline is back in operation, Aramco is offering spot cargoes for October and November at prices that are below the official selling price for some October barrels. These changes are very promising for customers who had previously been informed of the lack of oil supply.
Saudi Arabia typically sends between 700,000 to 800,000 barrels of oil to Europe daily, the majority of which is under long-term contracts. The cancellation of October contracts had pushed refiners towards the spot market in search of replacement barrels. Now, with the availability of Saudi oil and the beginning of price reductions for some grades of oil in Europe, the market situation appears to have improved.
Saudi Arabia's oil production significantly improved in September, reaching over 8 million barrels per day, which is an increase of nearly one-third compared to the lowest production level in over three decades in August. Other Gulf producers are also improving; the United Arab Emirates has raised its production to historical highs, and Iraq's exports have approached pre-war levels. This improvement comes as Iranian attacks on energy infrastructure and vessels near the Strait of Hormuz continue.
Aramco is also seeking crude oil storage capacity abroad and alternative export capacities to reduce its vulnerability to regional disruptions, including an agreement for oil storage in Singapore that will begin in 2027.
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