Saudi Arabia risks a serious shortfall in oil exports if a major pipeline knocked out by drone attacks is not repaired soon, market analysts and buyers have warned. The prolonged outage of the East-West pipeline has unsettled international markets.
According to market estimates, Saudi Arabia could exhaust its available oil stocks designated for export within a matter of days. Analysts said that outcome could remove more than 4% of global oil supply from the market, a development that would worsen an already fragile global energy situation.
Pressure on oil prices
The international oil market has already entered a period of intense turbulence, with prices moving at record levels and the effects gradually spreading through the global economy. Rising energy costs are fuelling inflationary pressure, while yields on U.S. government bonds have moved higher than the levels recorded during the 2008 financial crisis.
A further drop in Saudi exports could deepen the supply crisis, particularly if repairs to the pipeline take weeks to complete.
The critical East-West pipeline
The East-West pipeline is one of Saudi Arabia's most important pieces of energy infrastructure. It carries oil from facilities in the east of the country to the Red Sea coast.
The pipeline holds particular strategic value because it allows the kingdom to channel large volumes of crude to international markets without relying solely on routes through the Persian Gulf.
The pipeline went out of service on September 11 following drone attacks. Riyadh has not yet given a clear timeline for its full restoration.
Estimates on the damage
Sources who spoke to Reuters gave differing estimates of how long repairs would take. One source said restoration could take five to six weeks, while another estimated the pipeline could return to operation sooner.
Officials are also considering whether part of the oil flow could be restored gradually even before all repair work is finished.
Concern over global supply
The uncertainty surrounding the pipeline has heightened concerns about the adequacy of global oil supply at a time when markets are closely watching every development in the Middle East.
Saudi Arabia remains one of the world's most important oil exporters. That means any major disruption to its flows can have a direct impact on energy prices, inflation, and the economies of major oil-importing countries.
The coming period will show whether Riyadh can restore the pipeline in time or whether the market will face an even sharper supply crisis.
