Yanbu Port's inventory can only sustain exports for 5 to 7 days! If Saudi Arabia is attacked and oil pipelines continue to be disrupted, the world may face a 4% crude oil shortage.

Yanbu Port's inventory can only sustain exports for 5 to 7 days! If Saudi Arabia is attacked and oil pipelines continue to be disrupted, the world may face a 4% crude oil shortage.

Saudi Arabia's east-west oil pipeline was shut down by a drone attack, and if it cannot be restored within days, the global oil supply will face a shortfall of about 4%. This threat comes at a time when the global energy crisis continues to deepen, oil prices have driven inflation higher, and US Treasury yields have risen to their highest level since the 2008 financial crisis.

On the 13th, Reuters reported that several Saudi crude oil buyers and traders revealed that Saudi Arabia's inventory at Yanbu port can only sustain exports for 5 to 7 days. If the pipeline cannot be restarted in time, exports will decline sharply.

Pipeline outage leads to critical depletion of export reserves.

Last Friday, a drone attack forced Saudi Arabia to shut down an east-west oil pipeline that runs across the Arabian Peninsula and through the heart of the desert. The pipeline previously transported approximately 4 million barrels of crude oil per day to the Red Sea port of Yanbu, accounting for about 4% of global supply.

According to Xinhua News Agency, the Saudi Arabian Ministry of Energy issued a statement on September 11 stating that the Riyadh and Medina sections of the East-West oil pipeline were attacked multiple times on the morning of September 10. Precautionary measures were taken to shut down the pipeline, and the attacks resulted in injuries to some personnel. The statement did not specify the method of the attacks, the identities of the attackers, or the timeline for the pipeline to resume operation. This pipeline transports crude oil between Saudi Arabia's eastern oil fields and export facilities along the Red Sea coast, and is a crucial alternative oil transport route for Saudi Arabia amidst the disruption of navigation in the Strait of Hormuz.

Three industry sources familiar with Saudi Arabia's export business told the media that after the pipeline shutdown, the inventory at Yanbu port can only sustain exports for five to seven days . In addition, Saudi Arabia has some inventory at the Egyptian Red Sea port of Ain Sukhna and the Mediterranean port of Sidi Kerir, which can support supplies for a few more days, but all four sources emphasized that if the pipeline does not resume operation, these inventories will eventually be depleted.

Industry estimates suggest that Yanbu Port has an oil storage capacity of approximately 35 million barrels, while Ain Sukhna and Siddiqlir have storage capacities of 18 million and 20 million barrels respectively. However, none of the ports are currently operating at full capacity.

The recovery period is unclear, and the market is highly uncertain.

There are significant discrepancies in the assessments given by various sources regarding the extent of the damage and the time required for repairs. According to Reuters, one source said the repair work could take five to six weeks, while another source indicated that the repairs could be completed more quickly and that it might be possible to partially restore pump oil during the repair period.

The information vacuum surrounding Saudi Arabia is making it difficult for the market to price oil. Analysts point out that the uncertainty surrounding the repair cycle is the most critical risk variable in the current oil market—if the pipeline can be partially restarted within days, the supply gap may be manageable; if the repair is delayed for weeks, the global market will face a more severe stress test.

The global supply crisis continues to deepen

The attack on the pipeline occurred against the backdrop of a historic slump in Middle Eastern energy exports. The International Energy Agency (IEA) stated last Friday that Saudi oil supplies fell to their lowest level in over 30 years in August due to disruptions in the Strait of Hormuz and Red Sea shipping routes. The IEA projects that global oil supplies will decline by approximately 5.7 million barrels per day this year, a drop of about 6%.

Saudi Arabia reported to OPEC last week that its crude oil production in August had plummeted to 6.2 million barrels per day from 10.9 million barrels per day in February before the war. The Middle East's total supply before the war was approximately 22 million barrels per day; now, the daily flow through the Strait of Hormuz is only 6 to 9 million barrels, a staggering decline.

To make matters worse, the Houthi rebels in Yemen seized an island at the entrance to the Red Sea on Friday, further threatening the safety of Saudi oil tankers transporting goods through the Red Sea. The combined shocks on the supply side have continued to push up global fuel prices, and this inflation is being transmitted to the bond market, with US Treasury yields rising to their highest level since 2008.

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