Saudi Arabia has cut back crude oil shipments to Europe after drone attacks damaged the strategic East-West pipeline, triggering a new alert across global oil markets.
Riyadh told European customers that some cargoes scheduled to load in September have been cancelled, while loadings at the Yanbu terminal on the Red Sea have been suspended. The move set off an immediate scramble for alternative supplies, with prices for some spot cargoes in Europe rising above $120 a barrel.
According to Reuters, Saudi Arabia blamed the pipeline attack on an Iraqi militia. The report noted this attack is separate from the strikes that Iran-backed Houthi forces have carried out from Yemen against Saudi targets.
Pipeline That Replaced the Strait of Hormuz
The East-West pipeline runs about 1,200 kilometres across the Arabian Peninsula, carrying crude oil from Saudi Arabia's eastern oil-producing regions to Yanbu.
Its importance grew sharply after shipping through the Strait of Hormuz was severely disrupted. Over the past six months the pipeline has carried roughly 4 to 5 million barrels a day, equal to 4% to 5% of global supply.
The pipeline has allowed Saudi Arabia to bypass the Strait of Hormuz and keep exporting through the Red Sea. Its shutdown temporarily removes one of the most important alternative supply routes to the global market.
US Energy Secretary Chris Wright said the flow of oil could be restored within days. Market sources gave very different estimates, however, with one warning that a full repair could take five to six weeks.
The most likely interim scenario is a partial restart of the pipeline, if technical assessments allow it, with repair work continuing in parallel. The actual length of the disruption remains the key factor determining the scale of the problem.
Europe Scrambles for Alternative Crude
At least three European refineries have been informed of cancellations or significant delays to their cargoes, while additional customers are awaiting word from Saudi Aramco on their own deliveries.
Some supplies due to load in the last ten days of September may now be pushed back to November. Aramco has not commented publicly on the reports.
Poland's Orlen is especially exposed, sourcing around 40% of its crude from Saudi Aramco and operating refineries in Poland, Lithuania and the Czech Republic. The company has turned to cargoes from the North Sea, the United States, Kazakhstan, Algeria and Guyana, though it has not so far reported a direct disruption to its supply.
The simultaneous search for alternative cargoes by many buyers at once is pushing up premiums on available quantities, shifting the crisis from physical availability to the cost of supply. Even refineries that secure the volumes they need are likely to pay significantly higher prices.
Oil Prices Jump After Cancellations
After news of the cargo cancellations and the suspension of exports from Yanbu, Brent crude rose $2.81 to $108.49 a barrel, while US benchmark WTI gained $3.29 to reach $104.68.
These futures prices should not be confused with those of immediately available spot cargoes, which reached as high as $122 a barrel because of urgent demand. The gap reflects the pressure on buyers who must replace cancelled deliveries in a very short window.
Analysts believe a prolonged loss of Saudi volumes could push Brent above $120, though this is not a certain outcome. The decisive factors will be how quickly the pipeline resumes operation, the level of available reserves, and whether more oil can be routed through other paths.
Libya Adds a Second Supply Shock
Adding to the pressure is a halt in production at Libya's Hamada, Sharara and NC5 fields. Members of the Petroleum Facilities Guard, who are staging protests, closed a valve on the Hamada-Zawiya pipeline.
Libya's National Oil Corporation warned it may declare force majeure if operations are not restored or if the protests spread to other facilities.
The Guard is demanding to be placed financially and administratively under the National Oil Corporation instead of the defence ministry. It has also threatened cuts at other fields, including El Feel, Wafa and Al Hamsa.
The simultaneous disruption in Saudi Arabia and Libya further limits the volumes of crude that can quickly reach the European market.
What the Crisis Means for Greece
Greece faces no immediate risk of fuel shortages at this stage. The country holds mandatory safety reserves and has strong domestic refining capacity able to process different grades of imported crude.
That, however, does not shield the Greek economy from rising international prices. Crude oil, freight costs, risk insurance and refined product prices are all set on international markets and affect costs regardless of whether reserves are sufficient.
The first impact is likely to show up in wholesale prices for petrol, diesel and heating oil. If the price rise holds, it will gradually feed through to the pump, to transport, to agricultural production, to shipping and ultimately to the prices of goods and services.
Diesel is under particular pressure, since the market was already strained by strikes on Russian refineries and restrictions on oil product exports. Higher diesel prices directly raise the cost of road transport and, through it, the entire supply chain.
The Worst-Case Scenario for Fuel Prices
The most serious scenario is not a brief, few-day halt to the Saudi pipeline, but simultaneous and prolonged pressure on several energy routes at once: the Strait of Hormuz, the East-West pipeline and the Red Sea.
If the pipeline returns quickly to partial or full operation, the market may absorb part of the shock. If repairs instead take weeks and the attacks continue, European countries will compete for limited alternative supplies at significantly higher prices.
For Greece, the immediate question is therefore not whether oil will be available, but how expensive it will be by the time it reaches refineries, and how quickly that increase is passed on at the pump and into the overall cost of living.
