Saudi Arabia has warned that the shutdown of the major East-West oil pipeline may result in a 4% decrease in global oil supply. This pipeline, located in the deserts of the Arabian Peninsula, was shut down on Friday (September 20) due to an attack, and currently, the existing oil storage in the country is rapidly decreasing.
Dimensions of the Oil Supply Crisis
According to oil buyers and traders, if the operation of this pipeline is not resumed in the coming days, Saudi storage for exports will run out. This could exacerbate the global oil supply crisis and have significant impacts on global fuel prices and inflation in various countries.
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Saudi Arabia, the world's largest oil exporter, uses this pipeline to transport about 4 million barrels of oil per day, equivalent to 4% of global supply, to the port of Yanbu on the Red Sea. However, with the shutdown of this pipeline, the existing storage at the port of Yanbu will only be sufficient for five to seven days.
Details of Storage and Meeting Customer Needs
Saudi Arabia's storage capacity at the port of Yanbu is about 35 million barrels, and the country also has storage facilities at the ports of Ain Sokhna and Sidi Kerir in Egypt, which have storage capacities of 18 and 20 million barrels, respectively. However, four sources familiar with the matter told Reuters that if the East-West pipeline is not resumed, the existing storage will eventually run out.
The International Energy Agency also announced on Friday that Saudi oil supply in August fell to its lowest level in over three decades due to reduced export flows from the Strait of Hormuz and the Red Sea. The agency also predicted that global oil supply would decrease by 5.7 million barrels per day (about 6%) this year.
Last week, Saudi Arabia informed the Organization of the Petroleum Exporting Countries (OPEC) that its oil production in August had decreased to 6.2 million barrels per day. This is while the country's oil production in February, before the start of the U.S. and Israeli war against Iran, was 10.9 million barrels per day.
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