Saudi Aramco, the Saudi Arabian oil giant, has informed at least two European refinery customers that they will not receive any crude oil in October. This action was taken after an attack on a key pipeline in the country leading to the Red Sea. According to informed sources, this decision affects all European buyers who typically receive Saudi crude on a monthly basis under long-term contracts.
Details of Saudi Aramco's Decision
Saudi Aramco did not respond to requests made outside of normal working hours. The company shut down its East-West pipeline last week after the facility was targeted in drone attacks. The pipeline is expected to resume partial operations in the coming days and return to full capacity within six weeks.
The mentioned pipeline, also known as the Petroline, transports crude oil from the main production areas in eastern Saudi Arabia to the shores of the Red Sea, thereby bypassing the Strait of Hormuz for oil supply. European refineries typically receive Saudi crude through the Mediterranean port of Sidi Kerir in Egypt, which is connected to the SUMED pipeline.
Implications of the Oil Allocation Cancellation
The suspension of the Saudi route has led some European refineries to seek alternative supplies. The Polish refinery Orlen has issued more than 10 tenders for alternative crude oil supplies since Friday. Meanwhile, European countries that are members of the Organisation for Economic Co-operation and Development imported an average of 577,000 barrels per day of Saudi crude in June.
This decision by Saudi Aramco may have significant implications for the oil market. Given the dependence of European refineries on Saudi crude, this action could lead to price increases and greater volatility in the oil market. As the global oil market is affected by geopolitical tensions and demand fluctuations, this decision could pose further challenges for suppliers and consumers.
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