Drones struck Saudi Arabia's East-West oil pipeline last Thursday, prompting the kingdom to suspend operations. The attack marks another severe disruption to an already tight global oil market.

The 1,200km (746-mile) pipeline, which carries roughly 4 to 5 million barrels of oil per day (bpd), links the country's major oil-producing fields in the east with the Red Sea port of Yanbu. It allows Saudi Arabia to bypass the Strait of Hormuz, which has been largely closed since the outbreak of the US-Israel war on Iran in February.

Saudi Arabia's Ministry of Energy described the shutdown as a "precautionary" measure after the attack caused damage and injuries in the Riyadh and Medina regions. The closure comes as the war has sharply reduced oil flows through the Strait of Hormuz and Houthi forces in Yemen have intensified attacks around the Red Sea and Bab al-Mandeb.

The extent of the damage is not yet clear, and estimates of how quickly the pipeline can return to normal operations vary. Sources familiar with the incident told Reuters that repairs could take five to six weeks, while another source said operations could restart sooner. Saudi officials said drones hit the pipeline in two areas around Riyadh and Medina. The Ministry of Foreign Affairs said the attack caused injuries and damage to infrastructure.

According to Saudi authorities, the launch of the drones was traced to Maysan province in southeastern Iraq, close to the Iranian border and an area where Iran-aligned armed groups have established a longstanding presence. The attack follows a strike in March near the Saudi-Aramco-ExxonMobil refinery in Yanbu that temporarily disrupted crude loadings from the Red Sea port.

The East-West pipeline, also known as the Petroline, is a 1,200km (745-mile) long oil pipeline built in 1981. It has a maximum capacity of seven million bpd, although actual flows have been lower in recent months – about two million bpd in August according to Kpler – the lowest monthly level since January as Houthi attacks made the Red Sea route difficult to use.

Saudi Arabia increased the amount of crude sent west during the first five months of the conflict, taking flows to roughly 4-5 million bpd. That represents about 4 to 5 percent of global supply and allowed the world's second largest oil exporter to bypass the Strait of Hormuz when shipping conditions deteriorated.

The pipeline's closure comes at a critical point for the global oil market. Before the war, the Strait of Hormuz supplied more than a fifth of oil globally – about 20 million bpd. According to Reuters, industry estimates now put the flow at about 6-9 million bpd through the strait, a dramatic reduction.

Saudi Arabia has responded by moving more crude towards the Red Sea. However, the flow and export of that oil depends on the pipeline, storage facilities and tankers transiting safely – all of which have been made vulnerable since the Iran war began in February. According to sources close to Reuters, if the pipeline remains shut, Yanbu has enough available stocks to sustain exports for about five to seven days, while Egyptian facilities in Ain Sukhna and Sidi Kerir, which store Saudi oil, could provide additional supplies for several days.

While this gives Saudi Arabia some buffer, it comes as global inventories have already been falling. The International Energy Agency said Saudi oil supply reached a more than three-decade low in August, with disruptions in Hormuz and the Red Sea. It says world oil supplies will decline by some 5.7 million bpd this year, equivalent to 6 percent of global supply. Oil prices have so far been cushioned by stockpiles and releases from strategic reserves, with Brent crude trading about $70-$90 in recent months. But the longer regional disruptions continue, the more those reserves will be depleted and the higher prices will rise. In June, the IEA said continued drawdowns could hit critical levels with experts saying that if inventories approach exceptionally low levels, Brent could potentially rise to $150 a barrel.

If damage to the pipeline proves extensive, and attacks continue to threaten Yanbu and shipping routes beyond it, Saudi Arabia could find that its ability to compensate for lost Gulf exports is itself becoming constrained. Gavekal Research noted that if Yanbu, which processes more than one million bpd, goes offline because of threats from Houthi drones, "this would be a disaster for the world at a time when global refining capacity is already critically tight."

Source: www.aljazeera.com