Saudi Aramco cuts Europe supplies after pipeline attack

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Saudi Aramco cuts Europe supplies

Highlights

Aramco plans no term crude for Europe next month.
European OECD imports were 577,000 bpd in June.
The East-West pipeline remains under repair.
European refiners are seeking replacement barrels.

The decision applies to European customers that normally receive Saudi crude through monthly term contracts, Bloomberg reported. At least two refiners were informed that their allocations would fall to zero, while the report said the suspension covers all European buyers.

European refiners face a supply gap

Saudi Arabia shut the East-West pipeline after drone attacks damaged the system last week. The route carries crude from producing regions in the east to Yanbu on the Red Sea, allowing Saudi exports to reach western markets without relying on the Persian Gulf route.

Aramco is working to restore part of the pipeline within days, with full capacity potentially returning within roughly six weeks. Until then, European refiners face a more difficult search for replacement barrels.

Polish refiner Orlen has already been seeking additional cargoes, adding pressure to physical crude markets. Dated Brent, the benchmark used for physical barrels in Europe, briefly traded above $130 a barrel this week as buyers competed for available supply.

European OECD countries imported about 577,000 barrels a day of Saudi crude in June, according to International Energy Agency data cited in the report. Those supplies typically reach Europe through Egypt's Mediterranean port of Sidi Kerir.

Aramco redirects barrels toward Asia

Saudi Arabia has sought alternative ways to maintain exports while the pipeline is unavailable. Aramco has offered Asian customers spot cargoes and increased flows toward the Persian Gulf, including barrels collected near the Strait of Hormuz.

That strategy provides greater flexibility for Asian customers but offers less immediate help to Europe. Cargoes heading west face longer and more complicated routes, including shipping around Africa when other regional passages are considered too risky.

The result is an increasingly uneven physical market: Saudi barrels can continue reaching some customers, while European refiners face reduced access and potentially higher replacement costs.

Oil market absorbs conflicting supply signals

Brent crude was trading at $104.75 a barrel, up 0.62%, while U.S. West Texas Intermediate (WTI) was at $97.62, down 3.44%, according to the latest market data provided Friday. The divergence shows that the broader crude market is balancing improving prospects for alternative Saudi exports against tighter immediate availability for European refiners.

The cancellation of next month's European allocations could keep physical crude markets tight even if the East-West pipeline gradually resumes operations. With Saudi supply routes still constrained, progress on repairs and the availability of replacement barrels will remain important drivers for oil prices.

We have previously highlighted that Houthi attacks increase pressure on Saudi Arabia.

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