Saudi Arabia warns European refineries that crude oil supply disruptions may continue next month, adding further risk to Europe's "winter energy crisis."

Saudi Arabia's tightening of crude oil supplies to European refiners has added further turbulence to an already strained global energy market. With damage to east-west pipelines and disruptions to shipping in the Strait of Hormuz, European crude oil supply channels are contracting further, increasing supply pressure before winter.

According to Bloomberg, Saudi Aramco has notified at least two European refiners that they will not receive any crude oil deliveries next month, and this decision has reportedly extended to all European buyers. Following the news, international oil prices surged, with WTI crude rising $0.69 to $96.16 per barrel within five minutes. As of press time, WTI has reversed its earlier losses, rising 0.3% to $97.51 per barrel after falling more than 2%.

For Europe, the Saudi supply disruption means refiners will need to turn to international markets for alternative crude oil, potentially further driving up raw material procurement costs, especially given the already tight supply of diesel and natural gas. In June, OECD member countries imported an average of 577,000 barrels of Saudi crude oil per day. If the supply gap persists, it will increase the difficulty of replenishing inventories and securing supplies before winter .

Damage to East-West pipeline disrupts Saudi Arabia's supply to Europe

Earlier this month, Saudi Arabia's East-West oil pipeline was forced to shut down after a drone attack. The pipeline, which connects Saudi Arabia's eastern oil-producing region to export terminals on the Red Sea coast, has a daily transport capacity of 7 million barrels and bypasses the Strait of Hormuz, serving as a crucial alternative route for Saudi Arabia to supply crude oil to Europe.

Earlier this week, the market had anticipated that the pipeline could restore about half of its capacity within days, but this expectation largely failed to materialize by the weekend. Meanwhile, shipping through the Strait of Hormuz remained nearly at a standstill. Following the outbreak of the US-Iran conflict, Saudi Arabia had previously increased the utilization rate of the East-West pipeline to reduce its dependence on the Strait of Hormuz.

The lack of a clear timetable for supply recovery has prompted European refiners to actively seek alternative sources. Polish state-owned oil company Orlen has issued more than 10 tenders this week, seeking to fill the gap left by Saudi crude oil in its contracts.

Europe's urgent search for oil sources makes oil pricing more difficult.

European buyers' concentrated entry into the international market to purchase alternative crude oil could further drive up spot prices and increase feedstock cost pressures on refiners. The US diesel crack spread is currently around $112. Mike McGlone, senior commodities strategist at Bloomberg Intelligence, previously pointed out that the tense situation in the global refining market has raised concerns about a repeat of the 2008 gasoline shock.

More problematic is the market's current difficulty in determining when the supply disruptions will end. Natasha Kaneva, head of commodities research at JPMorgan Chase, stated in a client note on Thursday that the bank has "no baseline forecast view" for the first time since the outbreak of the Middle East conflict because it "simply doesn't know how to model the eventual outcome."

With Brent crude briefly surpassing $100, the progress of the East-West pipeline repairs, shipping in the Strait of Hormuz, and the availability of alternative crude oil supplies in Europe will be key variables determining the next move in oil prices. For the European refining industry, the ability to replenish supply before the winter demand peak will also depend on when these alternative channels stabilize.

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