Asian Refiners Seek Answers After Saudi Pipeline Shutdown

Asian refiners remain uncertain about the impact of the shutdown of Saudi Arabia's key East-West oil pipeline to the Red Sea, following drone attacks originating from Iraq near the Iranian border. The Saudi government implemented the precautionary shutdown in response to the attacks, which caused several injuries. As the world's largest crude oil exporter, Saudi Arabia relies on the East-West pipeline to bypass the Strait of Hormuz due to conflicts in the region.

This pipeline now carries around 4 million barrels per day (bpd) of Saudi crude oil to the Red Sea port of Yanbu. However, with the pipeline closed, the risk has arisen for Yanbu to experience disruptions in oil loading schedules. Asian refiners have requested updates from Saudi Arabia, but at least four refiners have not yet received any clarification.

Some of these refiners anticipate receiving their shipments at Yanbu as planned, provided there are no delay notices in the coming hours and days. The market initially priced in a higher risk of disruption to Middle East oil supply, with Brent futures surging to $108 per barrel. The ongoing attacks and lack of diplomatic progress have led to soaring oil prices, which may prompt the U.S. Federal Reserve to consider a September rate hike and the White House could explore invoking the Defense Production Act to support refineries nearing capacity.