Saudi Arabia Could Run Out of Oil For Export Within Days as Pipeline Shut - Newsweek

Saudi Arabia will run out of oil to export via a major pipeline closed following drone attacks if the kingdom is unable to reestablish the flow within a week, it has been reported.

Repairs could take up to six weeks, endangering around 4 percent of the global oil supply, according to energy industry sources cited by Reuters.

Oil is already trading up, around 3 per cent today, on top of rises last week, because traders fear the shutdown could further tighten global crude supplies if it lasts more than a few days.

The kingdom announced on Friday it had shut its East-West oil pipeline as a precaution following strikes from Iraq, likely by Iranian-backed militant groups. Riyadh did not reveal the extent of the damage or how long it will stay offline.

The pipeline across the Arabian Peninsula has allowed Saudi Arabia to reroute 4 million barrels of oil per day to its port of Yanbu on the Red Sea, following the shutdown of the Strait of Hormuz due to the war in Iran.

With the pipeline out of service, Yanbu can only maintain exports for just five to seven days, according to industry sources, cited by Reuters. Newsweek has contacted the Saudi government for comment.

Saudi Arabia shut down the pipeline after it was hit in an air attack, officials said Friday, confirming reports of fire and smoke along the key energy route.

The Saudi Ministry of Energy said the closure was "precautionary" and its Foreign Ministry said several drones involved in the attack came from Iraq and gave Baghdad "an opportunity to take the necessary measures." The Iraqi government condemned the assault and ordered an investigation.

Sentinel-3 satellite imagery showed a black smoke plume over the pipeline route across the desert between Medina and Mahd adh-Dhahab. NASA’s FIRMS system also showed clustered thermal anomalies in the area.

Oil prices jumped earlier last week to their highest levels since May because of the ongoing war with Iran, with the price for a barrel of Brent crude, the international standard, at $104.44 on Friday.

Saudi Arabia can also supply customers for several days from Egypt’s ports of Ain Sukhna on the Red Sea and Sidi Kerir on the Mediterranean, Reuters reported, citing another source. Yanbu’s storage capacity is around 35 million barrels, according to industry estimates, with the Egyptian ports able to store 18 million and 20 million barrels respectively.

But stocks are not full and will run out without the East-West pipeline resuming operations, soon, according to Reuters sources. Saudi oil supply dropped to a three-decade low in August due to reduced flows via Hormuz and the Red Sea, the International Energy Agency (IEA) said last week.

A decline in flows from the kingdom will raise fears about a global supply crunch which could have a further knock-on effect in the U.S. where Americans are paying an average of $6 a gallon at the pump, a key cost-of-living issue for the Trump administration ahead of the mid-term elections in November.

Contact Newsweek editors on this story: Daniel Orton and Trevor Davies.