Saudi Arabia has closed its strategic ‘East-West’ crude oil pipeline as a precautionary measure. According to the Saudi Energy Ministry, the pipeline was targeted in several attacks in the Riyadh and Medina areas a day earlier.
However, the ministry has not identified those responsible for the attacks nor provided information on the damage caused to the pipeline.
According to Press TV, the Iranian government’s international news network, the ‘East-West’ pipeline is extremely important for Saudi Arabia. Its capacity is about 70 lakh barrels per day.
It connects the country’s oil fields to export terminals on the Red Sea and provides an alternative route for crude oil supplies from the Persian Gulf.
The strategic importance of this pipeline has increased further after the increase in tension in the Strait of Hormuz. Saudi Aramco CEO Amin Nasser said last month that the pipeline played a more important role in mitigating the impact of the closure of the Strait of Hormuz than releasing emergency oil reserves.
Pressure on Saudi Arabia’s Red Sea oil export route is also increasing. Concerns about oil transportation in the region have increased after Yemen announced attacks targeting Saudi oil facilities and a maritime blockade.
It is worth noting that, in July, Yemen’s army had announced a maritime blockade against Saudi Arabia, calling it a strategy of “encirclement in exchange for encirclement”.
Saudi oil flows through the Red Sea fell sharply in August, according to data tracking ship movements. Loading of Saudi crude oil and condensate from the western city of Yanbu hit a six-month low.
At the same time, market intelligence platform Vortexa estimated the loading from Yanbu in August at about 32 lakh barrels per day, while according to Kpler data it was about 15 lakh barrels per day.
The decision to close the pipeline has come at a time when Saudi Arabia’s crude oil production has also registered a huge decline.
According to OPEC, the Organization of Petroleum Exporting Countries, Saudi Arabia’s oil production declined to about 62.4 lakh barrels per day in August, whereas in July it was about 81 lakh barrels per day.
This is said to be the lowest level of Saudi oil production since 1990. This decline has occurred at a time when Saudi Arabia and other OPEC countries were moving ahead with plans to increase oil production.
The oil market has also been affected due to regional tensions and reduction in global crude oil supply. The price of Brent crude crossed $100 per barrel, while oil prices were up more than 8 percent by the end of the week.
If Saudi Arabia’s alternative oil export routes also remain affected for a longer period, pressure on global oil supplies and prices could increase further.