Saudi Arabia’s oil supplies to global markets could be exhausted within days after drones launched from Iraq struck a critical pipeline, experts have warned.
Satellite imagery has shown the apparent scale of damage to the 745-mile east-west oil pipeline following Thursday’s strikes, with one pumping station seemingly heavily charred.
Riyadh shut down the pipeline after the attack, putting as much as 4 per cent of global oil supply at risk and pushing crude prices higher.
The disruption comes as Iran-aligned Houthi rebels in Yemen step up attacks on Saudi targets and seize the strategic island of Perim in the Bab al-Mandab strait, widening their control over the narrow waterway.
Oil prices climbed more than 3 per cent on Monday after ‘a step-up in attacks on Saudi Arabian energy infrastructure, including targeting the crucial east-west pipeline,’ ING commodity strategists said.
The route enables Saudi Arabia, the world’s biggest crude oil exporter, to avoid the Strait of Hormuz by transporting roughly 4million barrels a day to Yanbu, its Red Sea port.
Should the pipeline remain closed, oil already stored at Yanbu would be enough to sustain exports for only about five to seven days, industry sources told Reuters.
Energy markets are already under intense pressure after the Iran war led to the closure of the Strait of Hormuz, a route that normally carries one-fifth of the world’s oil and gas supplies.
Satellite imagery has revealed the apparent extent of damage to the 745-mile east-west oil pipeline after Thursday’s strikes.
The pipeline allows Saudi Arabia, the world’s largest crude exporter, to bypass the Strait of Hormuz by moving around 4million barrels a day to the Red Sea port of Yanbu.
A pumping station appears badly charred following the drone attack
Iraq said it had fired a military commander and launched an investigation after admitting the drone attack on the vital pipeline had originated in one of its provinces bordering Iran.
A further decline in Saudi flows will worsen the global supply crunch, which has already pushed global fuel prices to record highs, spurred inflation around the world and sent US bond yields to the highest levels since the 2008 financial crisis.
Sources that spoke to Reuters gave varying estimates, with one saying the damage could take as long as five to six weeks to repair, while another said it could be fixed sooner and could resume pumping partially while repairs are ongoing.
Yanbu storage capacity stands at around 35 million barrels, according to industry estimates, with Ain Sukhna and Sidi Kerir able to store 18 million and 20 million barrels respectively.
Stocks are not full and will ultimately run out without the east-west pipeline resuming operations, the four sources said.
Saudi oil supply has already fallen to a more than three-decade low in August on reduced flows via Hormuz and the Red Sea, the International Energy Agency said on Friday.
World oil supply will decline this year by 5.7 million bpd, or about 6 per cent, according to the IEA, which coordinates Western energy policies.
The Middle East supplied around 22 million barrels per day of oil before the war.
Flows through the Strait of Hormuz have slowed to just 6 million to 9 million bpd, industry sources say.
Saudi Arabia told OPEC last week that its oil production had dropped to just 6.2 million bpd in August from 10.9 million bpd in February before the start of the war.
Saudi Arabian state media on Sunday released video footage of damage to homes and a mosque from what it said was a Houthi attack on the country’s southern Jazan province.
The Houthis said they had also struck a Saudi military base in a neighbouring province.
Meanwhile, a vessel in the Strait of Hormuz was struck by a projectile, causing a fire and forcing the crew to be evacuated, the British maritime security agency UKMTO said on Sunday.
Iran said one person was killed and four crew wounded aboard an Iranian commercial vessel struck off its coast.
The Houthis reached the strategic island of Perim on Friday, moving to tighten their control over the Bab al-Mandeb strait, another key oil transit lane that has been carrying 4 to 5 per cent of global supply in recent months.
Oil surged 8 per cent higher last week due to the disruptions, rising above $100 for the first time since July.
Omani Foreign Minister Badr Albusaidi said on X on Sunday that a scheduled Monday meeting in Oman between Gulf countries and Iran to discuss the Strait of Hormuz had been postponed.
No peace talks have been held on the war, launched six months ago by the United States and Israel, since an interim agreement in June collapsed.
