Key facts
- Saudi Arabia shut down its East-West oil pipeline after drone attacks from Iraq.
- The pipeline shutdown risks 4 million barrels per day of Saudi crude oil shipments.
- Saudi Arabia has sold 20 million barrels of crude oil on the spot market for loading outside the Strait of Hormuz.
- Chinese and other East Asian refiners are the primary buyers of the spot crude.
- Japanese refiners are seeking alternative supplies, such as Oman crude.
- Repairs to the pipeline could take weeks.
Saudi Arabia has sold as many as 20 million barrels of crude oil on the spot market for loading outside the Strait of Hormuz, according to traders familiar with the matter. This comes after the Kingdom was forced to shut down its critical East-West oil pipeline following drone attacks launched from territory near the Iranian border.
The 750-mile-long East-West pipeline is a vital route for Saudi Arabia, enabling it to bypass the Strait of Hormuz and re-route crude loadings from eastern ports to the Red Sea port of Yanbu. The shutdown risks approximately 4 million barrels per day of shipments and could take weeks to repair.
Chinese refiners, including state-held giants and independent processors, along with crude processors in other East Asian countries, have been the main buyers of the Saudi spot crude offerings. Buyers will load cargoes via ship-to-ship transfers in the Gulf of Oman, avoiding transit through the Strait of Hormuz.
Japanese refiners have been seeking alternative crude supplies, such as Oman crude, for earlier loadings due to the disruption. Chevron CEO Mike Wirth commented that market buffers have been "played out," indicating potential upward pressure on oil prices amid depleted global inventories.