Saudi Arabia left European refineries without oil for a month
Saudi Arabia's state oil company Saudi Aramco has informed at least two European refineries that they will not receive crude oil under long-term contracts in October. According to information from Bloomberg agency, this decision applies to all European buyers.
Illustrative photo. Photo: Cristobal Olivares/Bloomberg via Getty Images
Export problems arose after a drone damaged a Saudi Aramco pipeline near the Red Sea last week. In recent months, it has provided the bulk of Saudi oil exports, as the Strait of Hormuz on the opposite side of the country remains blocked.
European companies typically receive Saudi oil under long-term agreements that guarantee regular monthly supplies. The reduction in imports has already affected the market: the price of physical Dated Brent oil supplies this week exceeded $130 per barrel. At the same time, Brent futures for the nearest month only rose to $109, and on Friday their price dropped below $105.
Amid the oil shortage, Polish company Orlen has already had to urgently look for other suppliers. The absence of Saudi oil in October may force European refineries to seek alternative sources of raw materials even more actively, which could lead to further price increases in the region.
Saudi Aramco expects to partially resume operations of the damaged pipeline in the next few days, and to bring it to full capacity within six weeks.
It is convenient for European buyers to receive oil through a port on the Red Sea. From there, it can be pumped via the Egyptian pipeline to the Mediterranean port of Sidi Kerir, where the oil is loaded onto tankers for further delivery to European refineries.