Lipow Oil AssociatesPrivate± Mixed
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US expects Saudi Arabia to reopen East-West Pipeline soon after armed group attack
CommodityGeopolitics Impact 4
US Energy Secretary Chris Wright said Saudi Arabia will reopen the East-West Pipeline again soon, after it was shut earlier following an attack by an Iran-backed armed group. He told CNBC that it was only a short and temporary disruption lasting just a few days. The pipeline is 1,200 kilometres long and allows Saudi Arabia to transport crude oil without passing through the Strait of Hormuz, and over the past several months it has carried about 4 to 5 million barrels per day, or roughly 4 to 5 percent of global oil supply. Saudi authorities said the closure was a precautionary measure, but have not disclosed a damage assessment or an estimate for how long it will stay shut. They ordered the pipeline closed last week after it was damaged in a drone attack launched from Iraq. Wright said Saudi Arabia is now shifting some oil exports back to shipping through the Strait of Hormuz with US military support while the pipeline remains out of service. Satellite images appear to show that one of the pipeline's pumping stations was heavily damaged. Andy Lipow, president of Lipow Oil Associates, said in an analysis that based on images circulating online, repairs could take several months. Matt Smith, director of commodity research at Kepler, said that if the pipeline is shut for a month, the market could lose as much as 120 million barrels of oil supply. That assessment is based on the assumption that the East-West Pipeline exports about 4.5 million barrels per day and that roughly 15 million barrels are held in storage at the Yanbu oil depot or terminal on the Red Sea coast.