A satellite image captured Sept. 13 shows damage to Saudi Arabia's East-West Pipeline following a drone strike. [AFP]
A satellite image captured Sept. 13 shows damage to Saudi Arabia's East-West Pipeline following a drone strike. [AFP]

Saudi Arabia has repaired its East-West Pipeline after a drone strike and restored crude oil throughput to roughly half the pipeline's maximum capacity. With the kingdom resuming Red Sea oil exports alongside transshipment through the Strait of Hormuz, attention is turning to whether international oil prices — which have been climbing in recent weeks — can now stabilize.

Bloomberg and the Wall Street Journal reported Monday (local time) that Saudi state oil company Aramco had resumed loading crude oil transported via the East-West Pipeline at the Red Sea port of Yanbu starting that day.

The pipeline is currently moving 3.5 million barrels per day, about half its known maximum capacity of 7 million barrels per day. Before the war broke out, Saudi Arabia had never operated the 1,200-kilometer pipeline at full capacity. After Iran blockaded the Strait of Hormuz, however, the kingdom ramped up throughput to 4 million barrels per day — equivalent to 4 percent of global crude supply.

After the East-West Pipeline was struck on Sept. 10, Saudi Arabia responded by sharply increasing shipments through the Strait of Hormuz. Vessels carrying Saudi crude switched off their automatic identification system (AIS) transponders to slip through the strait undetected, then transferred their cargoes to other ships in relatively safer waters.

Bloomberg reported that, despite the period of pipeline downtime, Saudi Arabia's average crude exports this month reached their highest level since the war began in February. According to shipping data firm Kpler, crude loadings at Saudi Arabia's Ras Tanura terminal jumped from 1.5 million barrels per day earlier this month to 6.5 million barrels per day recently.

Saudi Arabia is now running both channels simultaneously — pipeline exports through Yanbu and transshipment through the Strait of Hormuz. The Wall Street Journal said the move deals a blow to Iran, because if Saudi Arabia boosts exports and stabilizes oil prices, it undercuts Tehran's strategy of squeezing prices to pressure the United States back to the negotiating table. In practice, international oil prices rose about 2 percent on Monday before giving back some of those gains late in the session; Brent crude settled up 0.92 percent at $105.28 a barrel.

Hamad Hussein, a senior economist at Capital Economics, said that if the recovery in East-West Pipeline flows is supported by a continued increase in exports through the Strait of Hormuz, Saudi Arabia's total crude exports could surpass pre-attack levels.

However, the threat posed by the Houthi rebels — a pro-Iran force — remains a wildcard. "Given the threat the Houthis pose to energy infrastructure, crude exports from Yanbu will be more difficult than before," Hussein said.


kate01@heraldcorp.com