East-West Pipeline Shutdown Hits Home As Saudi Aramco Halts Supplies To Indian Refiners: Report

(MENAFN- Live Mint) The fallout from the closure of the East-West pipeline in Saudi Arabia has hit refineries in India as Saudi's state-owned oil company Aramco has reportedly told them that they won't be receiving crude supplies until further notice. According to The Economic Times, Aramco, which has supplied about 9% of India's crude imports since the beginning of the war, has stopped all supplies to the country through both the Red Sea and the Strait of Hormuz.

The report added that Saudi Arabi has sold some spot cargoes to traders expected to deliver small volumes to Indian refiners through Hormuz. Aramco typically does not sell crude in the spot market and supplies customers under annual term contracts.

It added that while Indian refiners can secure alternative supplies, it is likely to be more to come at a higher price per barrel.

Houthi attack on East–West Pipeline

The East–West Pipeline, which stretches over 1,200 kilometers from Abqaiq and Juaymah in Saudi Arabia's eastern oil fields to the Red Sea port of Yanbu in the west, was a key crude supply route for Aramco, particularly following the closure of the Strait of Hormuz by Iran.

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The pipeline, which has a capacity to carry up to 7 million barrels of crude oil per day, had been moving 4 million to 5 million barrels per day, ​amounting to 4% ​to 5% of global supply. It was hit by alleged Houthi drones last week and reportedly damaged two pumping stations, forcing Saudi authorities to temporarily shut it.

Though the extent of the damage has not been made public, various estimates had projected the shutdown to last up to six weeks.

Can India find alternative supplies

According to Bloomberg, Indian state-owned refiners are facing the most significant supply uncertainty in months due to the conflict in the Middle East.

While September and October requirements are secured, processors are facing tougher decisions when it comes to November and beyond, the Bloomberg report added.

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India has relied heavily on discounted Russian oil and relatively secure term Middle Eastern supplies to contain import costs. A twin squeeze would leave its refiners competing for barrels from further afield, crimping margins at state fuel retailers unwilling to cut run rates, given their domestic mandate, and already selling gasoline, diesel and cooking gas below cost.

India's top refiners have already been leaning on the US, Brazil, Canada, Venezuela and Africa to diversify supplies, it added.

It is not just Indian refineries that have been affected due to the shutdown. According to a Reuters report, Aramco has also cut oil shipments to Europe.

Oil trading and shipping sources told Reuters that Saudi Arabia had informed European customers that some September-loading crude cargoes will ​be cancelled and oil loadings at the Red Sea port of Yanbu had been suspended.

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