The temporary closure of the key onshore pipeline Saudi Arabia uses to bypass the Strait of Hormuz has added another shock to an oil market already struggling with six months of Middle East supply disruptions.
And the damage now appears to be more extensive than initially believed.
Three pumping stations along Saudi Arabia’s East-West pipeline were damaged in last week’s attack, Reuters reported on Thursday, citing satellite imagery and industry sources. Earlier assessments had identified damage at two stations. Three sources told Reuters that repairs could take five to six weeks, although partial pumping could resume sooner.
Before the attack, the system was moving between 4 million and 5 million barrels per day (bpd), equivalent to roughly 4%–5% of global oil supply. Its total capacity is around 7 million bpd, including approximately 2 million bpd supplied to refineries.
Saudi Arabia shut the pipeline following multiple attacks on September 10. Satellite imagery previously published by MizarVision showed extensive fire and structural damage around pumping stations along the route.
Saudi Arabia Races to Restore Pipeline Flows
The revised damage assessment comes as Saudi Aramco races to restore at least part of the pipeline’s capacity.
Aramco is seeking to bring roughly half of the route’s capacity back online within days, according to Bloomberg, potentially by bypassing damaged infrastructure. Full operations could take around six weeks to restore.
That broadly corresponds with the latest Reuters assessment that repairs could take five to six weeks, although some pumping could resume while work continues.
Even a partial restart would provide some relief to an increasingly strained physical oil market.
With the East-West pipeline shut down, Brent crude surged to around $108 per barrel earlier this week as traders confronted the loss of the biggest Middle Eastern oil export route that does not involve Hormuz.
Saudi Arabia has relied heavily on the pipeline since the war began, moving roughly 4 million to 5 million bpd through the system during the past six months.
Meanwhile, crude inventories at Yanbu offer only a limited buffer.
Stocks at the Red Sea hub have fallen by nearly 6 million barrels over the past two months, from around 21 million barrels in July to below 15 million barrels, according to Kpler.
“At 3.5 million bpd, 15 million barrels represents little more than four days of theoretical supply,” Kpler analysts Amena Bakr and Michelle Brouhard noted earlier this week.
Not every barrel in storage is operationally available, meaning Saudi Arabia cannot simply maintain exports at previous levels until the tanks run dry.
Saudi Arabia Turns Back to Hormuz
Ironically, the pipeline outage is forcing Saudi Arabia to increase its reliance on the very waterway the East-West system was designed to bypass.
Saudi Arabia has sold as many as 20 million barrels of crude on the spot market this week for loading this month and next, Bloomberg reported, with buyers expected to receive barrels through ship-to-ship transfers outside Hormuz.
That allows buyers to avoid sending their own tankers deep into the Persian Gulf, but adds another layer of logistical complexity and cost.
The pipeline shutdown has exposed a deeper weakness in the market’s assumed supply optionality.
In effect, the market has attempted to bypass one chokepoint only to discover new concentrations of vulnerability.
Physical Oil Moves Into Scarcity Pricing
The consequences are increasingly visible in physical crude and refined-product markets.
“Brent near USD 110 signals considerable stress, but arguably understates the severity of the current physical squeeze,” Saxo Bank commodity strategist Ole Hansen said this week, pointing to Dated Brent above $130 and diesel above $200 as clearer indicators of immediate scarcity.
Steep backwardation and exceptionally strong refining margins show that buyers are paying increasingly large premiums for barrels available immediately.
The pressure is particularly severe in diesel.
U.S. diesel prices have climbed to record highs despite the United States being a major net exporter of distillates, as shortages elsewhere pull American barrels into the global market and drive refining margins higher.
Gasoline prices have also risen despite entering a period when seasonal demand would normally begin weakening.
The resulting energy-price surge is feeding into inflation at precisely the wrong time. The Federal Reserve raised its benchmark interest rate this week for the first time since 2023 as policymakers responded to renewed inflationary pressure.
For the oil market, meanwhile, the significance of the Saudi attack extends well beyond the immediate loss of pipeline capacity.
The East-West system was supposed to provide redundancy when Hormuz became unreliable. Its shutdown demonstrates that pipelines, storage tanks and alternative export terminals provide flexibility—but cannot eliminate geopolitical risk when the infrastructure itself becomes a target.
And with three pumping stations now reported damaged, restoring one of the global oil market’s most important safety valves may prove considerably more complicated than initially hoped.
By Tsvetana Paraskova for Oilprice.com
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