Saudi Red Sea oil stocks slump after pipeline attack

• Inventory estimated at 6-year low
• 10-day break in tanker loadings
• Saudi vessels increasingly go dark

Oil inventories on the Red Sea coast of Saudi Arabia have hit a six-year low following an attack this month on the country’s biggest pipeline, intelligence providers say.

Stored oil on Saudi Arabia’s western coast as of September 22 fell to 42 million barrels, about 10 million less than the seasonal average, according to Vortexa, which estimates oil stockpiles based on satellite imagery.

The East-West pipeline, which transports crude from oilfields in the east of the country to refineries and ports on the west coast, was shut on September 12 after a drone attack launched from Iraq.

The Energy Ministry has issued no update on the status of the pipeline and did not respond to AGBI requests for comment. The fall in Red Sea inventories suggests a precipitous drop in crude pumped to the coast, forcing local refineries to rely on supplies in storage.

“We have seen a sizable drawdown of onshore crude inventories at Saudi Arabia’s Red Sea ports,” said Xavier Tang, senior analyst at Vortexa.

The Red Sea had become a vital export route for Saudi oil since the beginning of March, when Iran announced that Riyadh’s preferred export route through the Strait of Hormuz was closed to shipping.

In recent weeks, however, threats from the Yemeni Houthi militia to Saudi shipping passing through the Bab al-Mandab strait have forced ships to sail north. Redirected vessels must pass through the Suez Canal and, for those bound for Asia, around Africa, adding between 20 and 30 days to their journey.

The oil volumes observed in storage would be equivalent to between eight and 10 days of exports at the rate state-owned oil company Saudi Aramco had previously targeted.

No tanker loadings were observed at the port of Yanbu for 10 days following the attack, according to maritime analysts Kpler.

Much of the stored inventory on the Red Sea is intended for domestic refineries, Kpler’s lead freight analyst Matthew Wright said. “We can’t know the exact split,” he added.

Reports began circulating on Tuesday that the East-West pipeline would recommence operations soon, although Aramco and the Energy Ministry declined to comment.

In recent weeks, Saudi Arabia has increased exports from east coast ports, relying more heavily on so-called “shuttling” to navigate through the Strait of Hormuz.

Just how much oil is leaving the country remains “a bit murky”, said Norbert Rücker, head of economics and next-generation research at Swiss private bank Julius Baer.

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Ships carrying Saudi oil have increasingly “gone dark”, evading detection by turning off their navigation transponders and loading oil in the night when they cannot easily be seen.

Such action has made it much harder for analysts to judge how much oil is leaving Saudi Arabia and the methods used to move it.

By Rücker’s estimate, the Gulf is exporting around 70 to 80 percent of pre-war crude volumes, based on reports of oil storage volumes in Europe and North America.

“They’re holding up exceptionally well,” Rücker said. “That wouldn’t be the case if there was not much oil coming out of the Middle East.”