Asian refiners brace for supply crunch as Aramco stays silent on pipeline repairs

Asian refiners are bracing for tighter sour crude supplies after Saudi Arabia shut its East-West oil pipeline following drone attacks on Friday, with at least four processors still waiting for official word from the kingdom on whether loadings at the Red Sea port of Yanbu will proceed as scheduled.

Silence From Aramco

Saudi Aramco has not responded to inquiries about the extent of damage to the pipeline or provided updates on supply allocations and shipment schedules, according to Reuters and Bloomberg. Marketing executives have also failed to respond to requests about the operation's status, traders involved in the discussions told Bloomberg. One refining source told Reuters that they had been notified of a loading delay but were not given a new date, while three others said they had received no guidance on whether Yanbu cargoes would be delayed or suspended.reuters+1

"Getting sour crude is a challenge. We will have to pay higher prices as all will be chasing limited supplies from Iraq, UAE and others," one refining source told Reuters.reuters

The pipeline shutdown pushed oil prices up around 3 percent on Monday, with the disruption threatening roughly 4 million barrels per day of Saudi crude shipments that had been routed through Yanbu. Gulf-to-Asia tanker rates have surged to record highs, adding further cost pressure on refiners in the region.oilprice+1

China and South Korea Assess Exposure

For the world's largest crude importing nation, the immediate fallout appears limited. "The impact on China is largely indirect, as Chinese refiners have stopped loading Saudi crude from the Red Sea since August," said Emma Li, lead China oil market analyst at Vortexa, as quoted by both Reuters and the South China Morning Post. However, the pipeline closure is raising ship-to-ship transfer costs for Chinese refiners receiving Gulf crude cargoes, and rising prices could dampen demand further, with refiners potentially cutting run rates.scmp+1

South Korea's Ministry of Trade, Industry and Resources said Monday that local refiners had already secured more than 90 percent of the crude needed for September and October, limiting the near-term impact. Vice Industry Minister Moon Shin-hak said the government would use all available policy measures, including a crude oil swap system with private companies, to prevent supply disruptions.koreaherald

Yanbu Flows Already Under Pressure

The pipeline shutdown compounds an already strained supply picture. Yanbu loadings had dropped sharply after Yemen's Houthis declared a blockade in July, falling to between 500,000 and 1 million barrels per day from about 6 million in June, according to ANZ analysts cited by Reuters. Some vessels had been loading at the port with their tracking transponders switched off to avoid detection. Suezmax tankers Lahore and Aspen were due to load crude from Yanbu on Monday, with at least one very large crude carrier expected in the coming days, according to Kpler shiptracking data cited by Reuters.reuters