Saudi Arabia’s oil exports via the Red Sea are holding steady for now, as the impact of a drone attack on its vital cross-country pipeline has yet to filter through.
The strike on Wednesday — hours after a ceasefire was declared in the Iran war — damaged one of 11 pumping stations along the 746-mile (1,200-kilometer) conduit from oil fields in the east to the Red Sea coast in the west. That has reduced throughput by 700,000 barrels a day, the state-run Saudi Press Agency said Thursday, citing an energy ministry official.
Still, it’s too soon for the attack on the pipeline to impact on exports from terminals at Yanbu. The speed at which oil passes through the link means that it will take several days for the lower flow rate to curb the amount of crude reaching the Red Sea port.
Saudi Arabia has quadrupled crude shipments from its Red Sea terminals to about 4 million barrels a day since the end of February, easing the impact of the near shutdown of the Strait of Hormuz. Exports remain stable at that level, according to tanker tracking data compiled by Bloomberg.
Even if the crude reaching the Red Sea port does begin to fall, the kingdom may decide to preserve export levels by trimming the amount sent to local refineries, power stations and water desalination plants, which are also supplied through the link.
The pipeline has a nameplate capacity to move 7 million barrels a day and is the only major alternative to taking tankers through Hormuz, so its operation is vital to getting at least some Persian Gulf crude to thirsty oil markets. About 2 million barrels a day are used within the kingdom, leaving a possible 5 million for export.
Written by: Julian Lee @Bloomberg
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