Saudi pipeline to bypass Hormuz hits 7 million barrel goal
(Bloomberg) — Saudi Arabia’s vital East-West pipeline spanning the Strait of Hormuz is pumping oil at its full capacity of 7 million barrels a day, according to a person familiar with the matter.
The technical milestone is the culmination of the kingdom’s long-running contingency plan to keep oil flowing after its main export route was effectively shut down. Fleets of tankers were diverted to the Red Sea port of Yanbu to collect the oil, providing an important lifeline for global supplies.
Crude oil exports through Yanbu have now reached nearly 5 million barrels per day, and the kingdom also exports between 700,000 and 900,000 barrels per day of refined products, according to a person familiar with the Saudi oil industry. Of the 7 million barrels passing through the pipeline per day, 2 million go to Saudi refineries.
The Yanbu route only partially offsets the supply hit from the closure of Hormuz, through which about 15 million barrels of crude oil were shipped per day before the war. But the bypass is one reason oil prices have failed to reach crisis-level highs in previous supply shocks.
While the Houthis in Yemen say they are now at war, the oil market’s concern will be that the Red Sea will become a new front in the conflict. While the Houthis have not given any indication that they will attack tankers passing through the Red Sea and Bab El Mandeb Strait, they have previously threatened ships in the region with unmanned aerial vehicles and missiles.
Saudi Arabia, which has a historic role as the world’s oil supplier of last resort and a reputation for reliability, had been preparing for the worst-case scenario, such as the closure of Hormuz, for decades. It implemented its contingency plan within hours of the first U.S. and Israeli strikes on Iran and has been increasing east-west shipments ever since.
The pipeline is more than 1,000 kilometers (620 miles) long, stretching across the Arabian Peninsula from major oil fields in the country’s east to the industrial port city of Yanbu. This is a byproduct of an earlier conflict, such as the Iran-Iraq war in the 1980s, which saw attacks on ships in the Bosphorus, but it is nothing like the unprecedented near-shutdown caused by the current conflict.
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