Saudi Arabia Cuts Europe Off From October Crude as Gulf Exports Surge

Saudi Aramco has told its European term customers they will receive no Saudi crude in October after damage to the kingdom’s East-West pipeline disrupted flows that had previously provided Europe with barrels that avoided the Strait of Hormuz. The damaged pipeline had been carrying about 4 million to 5 million barrels per day across Saudi Arabia to Yanbu, enabling onward shipment via Egypt’s SUMED line to the Mediterranean.

With that route out of action, Aramco sold roughly 60 million barrels from its Persian Gulf export terminal at Ras Tanura for September and October loadings. Those cargos are slated to transit the Gulf, undergo ship-to-ship transfers off Oman near Sohar, and are being taken by buyers in Asia — China, South Korea, India and Japan — rather than Europe.

The program will put an estimated 1 million to 1.5 million barrels per day of Saudi Gulf exports back into markets, according to the reporting. For European refiners the workaround offers little relief: Gulf barrels bound west must either transit Hormuz and the Red Sea, where shipping has faced attacks, or make a much longer voyage around Africa.

The developments fed market volatility this week. Brent crude was trading around $104.30 and U.S. WTI near $102 when the report was noted, after Brent had risen above $108 earlier in the week; dated Brent, the physical benchmark for European crude, topped $130 at one point. Separately, Poland’s Orlen has been sourcing North Sea, U.S. and Kazakh crude to replace delayed or canceled Saudi September cargoes.

Saudi officials and Aramco signaled a partial recovery of the East-West line: U.S. Energy Secretary Chris Wright said crude should be flowing through the pipeline within days, and Aramco is targeting roughly half capacity in the near term, while full restoration is unlikely for about six weeks.