Saudi Arabia has stopped its oil loading to Europe due to drone attacks that have damaged a key oil export pipeline to the Red Sea. This situation has led major customers like Poland to seek alternative sources, while shipment prices have risen above $120 per barrel.
Shutdown of Oil Pipeline and Its Impacts
The attacks on Saudi Arabia's East-West oil pipeline, which had shielded the country from the worst consequences of the closure of the Strait of Hormuz in the past six months, forced the country to shut down this pipeline on Friday. Trade sources reported that Saudi Arabia has informed its European customers that some oil shipments scheduled for September will be canceled, and oil loading at the Red Sea port of Yanbu has also been halted.
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The reduction of Saudi oil flow through the Red Sea has prompted the country to try to export more oil through the Strait of Hormuz. This export is being conducted using “dark” shipments, similar to methods used by the United Arab Emirates and Iraq. Such shipments allow Gulf oil producers to export between 7 to 9 million barrels per day, which is equivalent to 30 to 40 percent of pre-war volumes.
Market and Customer Reactions
This disruption in oil supply has led to an increase in oil prices, with Brent crude futures trading near $108 per barrel and physical market shipments in Europe even higher than $122 per barrel. In the week ending September 13, Saudi Arabia loaded 22 million barrels of oil on 12 ships at the Ras Tanura/Juaymah port, while in the three weeks prior, only 6 to 7 ships were loaded per week.
The integrated Polish oil company, Orlen, is trying to find crude oil shipments from the North Sea and other parts of the world to replace imports from Saudi Arabia. In 2022, Saudi Arabia became Orlen's largest supplier, now providing about 40 percent of the company's oil, which has made it dependent on the Saudi producer.
Orlen did not disclose specific details of its trading transactions but stated that it is actively managing its supply portfolio to ensure the continuous operation of its refining assets. The company has purchased several crude oil shipments in spot tenders and is seeking to buy North Sea crude as well as crude from farther regions like US Midland WTI and Kazakhstan's CPC Blend.
Orlen has also issued another tender for purchasing North Sea or Algerian crude for delivery in October and Guyanese crude for delivery in November. However, results are slowly being obtained. The Baltic port of Gdansk in Poland has received nearly 160,000 barrels per day of Saudi crude oil since the beginning of this year.
Feed deliveries to Orlen's refineries continue without disruption, and the company has stated that this process is currently proceeding without issues.
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