Saudi oil network hit by twin shocks

Saudi supply lines face deeper strain

Attacks on Saudi energy facilities have knocked about 600,000 barrels per day from the kingdom’s oil production capacity and cut throughput on the East-West Pipeline by roughly 700,000 bpd, according to Saudi state media citing an Energy Ministry official, in a blow to the world’s top oil exporter at a time when its western pipeline route has become strategically critical.

The disruption matters far beyond the kingdom’s borders because the East-West Pipeline has served as Saudi Arabia’s only crude export route while shipping through the Strait of Hormuz has been severely constrained. Reuters reported that one pumping station on the pipeline was struck, while damage at the Manifa and Khurais oilfields accounted for the combined loss in output capacity.

Saudi authorities said one member of industrial security staff employed by the energy company was killed and seven other employees were wounded. The same official account said the attacks also disrupted operations across a wider network of oil, gas, refining, petrochemical and electricity sites in Riyadh, the Eastern Province and Yanbu Industrial City, underlining how the pressure is no longer confined to a single installation or export corridor.

The biggest immediate concern for the market is that the supply hit combines production losses with a transport bottleneck. The East-West system can carry about 7 million barrels a day, with around 5 million bpd available for export, making it the kingdom’s principal bypass route when Gulf shipments are impaired. Reuters separately reported that Yanbu loadings were continuing despite the pipeline strike, suggesting that Saudi Aramco still has some operational flexibility even as damage is being assessed.

That mixed picture helps explain the market response. Brent crude rose to about $96.88 a barrel on Friday, while West Texas Intermediate traded near $98.65, as traders weighed fresh worries over Saudi supply against broader hopes that a fragile two-week ceasefire between Washington and Tehran might yet ease some pressure on regional trade routes. Even so, Reuters said tanker traffic through Hormuz remained largely frozen and there was still no sign of Tehran lifting its near-total blockade of the waterway.

Saudi Arabia’s central role in global energy flows makes even a partial outage significant. Reuters, citing US Energy Information Administration data based on 2023 figures, said the kingdom produces about 11.13 million bpd, or roughly 11% of world output. A 600,000-bpd reduction does not cripple Saudi supply on its own, but it becomes more serious when it coincides with damage to refining assets and constraints on the main route meant to compensate for Hormuz disruption.

The refining side of the story could prove just as important as the upstream losses. Saudi media said strikes hit major refining facilities including SATORP in Jubail, Ras Tanura refinery, SAMREF in Yanbu and the Riyadh refinery. Fires at Ju’aymah processing facilities also affected exports of liquefied petroleum gas and natural gas liquids. That means the fallout extends beyond crude into refined fuels and feedstocks that matter to industrial consumers and import-dependent economies across Asia and beyond.

Industry analysts have described the setback as a dual shock. One Dubai-based trader told Reuters the market had lost its main workaround for Hormuz, while Marex analyst Edward Meir said the impact on the Red Sea route was especially bullish for prices because it had been viewed as facing fewer problems than Gulf transit. UBS analyst Giovanni Staunovo said the attacks further tightened the oil market by reducing both production capacity and the volumes bypassing the strait.

At the same time, there are signs that buyers and producers are trying to plan for a partial return to more normal flows. Reuters reported that Saudi Aramco has asked clients to submit nominations for cargoes loading from Yanbu and Ras Tanura in May, while other Middle East producers are also preparing for an eventual resumption of shipping through Hormuz. That points to contingency planning rather than confidence, with nominations still tied to whether exports from eastern ports can restart safely.