NEW YORK: Saudi Arabia’s crucial East-West pipeline that circumvents the Strait of Hormuz is pumping oil at its full capacity of 7 million barrels a day, according to a person familiar with the matter.
Saudi Arabia has rolled out the contingency plan to boost exports through the pipeline to the Red Sea, as the effective closure of the strait due to the Middle East conflict has choked off Gulf oil producers’ main exit route. Flotillas of tankers have redirected to the port of Yanbu to collect the oil, providing an important lifeline for global supply.
Crude exports via Yanbu have now reached 5 million barrels a day and the kingdom is also exporting about 700,000 to 900,000 barrels a day of oil products, according to the person familiar with the Saudi oil industry. Of the 7 million barrels that goes through the pipeline, 2 million are destined for Saudi refineries.
The Yanbu route only partly offsets the hit to supply from shutting Hormuz, through which about 15 million barrels a day of crude shipments passed before the war. But the bypass is one reason oil prices haven’t reached the crisis-level highs of previous supply shocks.
With the Houthis now saying they are entering the war, the concern for the oil market will be that the Red Sea becomes a new front. Still, the Houthis have not given any indication they would attack tankers going through the Red Sea and Bab El-Mandeb strait, and at least for now there’s no sign of action in the area. -Bloomberg
