Saudi Arabia Cancels European Oil Cargoes Amid Pipeline Shutdown and Regional Threats

Saudi Arabia has informed several European clients that crude oil cargoes scheduled for shipment at the end of September will be canceled, according to three sources cited by Reuters. This marks one of the most severe practical blows yet to the kingdom's export capabilities, as it simultaneously grapples with the shutdown of its main oil pipeline, the Iranian blockade of the Strait of Hormuz, and Houthi threats to shipping in the Red Sea.

The volume of canceled cargoes and the identities of all affected clients have not been disclosed. Saudi Aramco, the state-owned oil company, declined to comment. Reuters emphasized that this is not a complete halt of Saudi oil exports to Europe, but rather the cancellation of several shipments scheduled to be loaded in the coming weeks. However, the cancellations indicate that the disruptions are no longer limited to concerns or isolated delays, but are beginning to actively impact oil supplies to customers.

One of the main affected clients is reportedly Polish energy firm ORLEN, which operates refineries in Poland, Lithuania, and the Czech Republic. Saudi oil accounts for approximately 40% of the company's oil supply. According to shipping data cited by Reuters, only about 2.1 million barrels are expected to arrive in September from the Egyptian terminal at Sidi Kerir to Poland, compared to about 6.6 million barrels in August.

Industry sources stated that ORLEN is now scrambling to find alternative suppliers. The company has already purchased North Sea crude types and is exploring increased purchases from the US and Kazakhstan. It also recently signed an agreement with Norway's Equinor, expected to supply up to a quarter of its refining needs. ORLEN reported that its refineries continue to operate normally and that there is currently no immediate fuel supply disruption, partly thanks to diversified procurement sources.

The Root of the Crisis: Pipeline Sabotage and Geographic Trap

The root of the crisis is the shutdown of Saudi Arabia's East-West pipeline following an attack last week. The pipeline, stretching approximately 1,200 kilometers, transports oil from production fields in the eastern kingdom to the port of Yanbu on the Red Sea coast. Recently, it carried between 4-5 million barrels per day, an amount equivalent to roughly 4%-5% of global oil supply.

The pipeline became the primary artery for the Saudi oil industry after traffic in the Strait of Hormuz dwindled due to the Iranian blockade and vessel attacks. It allowed Riyadh to pump oil westward, load it at Yanbu, and transport it via the Red Sea and the Suez Canal. Part of the oil was also pumped through Egypt's SUMED system to the Sidi Kerir terminal on the Mediterranean, and from there to European clients.

However, this escape route has now also been compromised. According to Reuters, oil loading at Yanbu has stopped or been heavily restricted following the pipeline shutdown. Inventories accumulated at the port and related facilities can allow limited continued operations, but do not provide a prolonged substitute for the steady flow from the eastern kingdom.

The crisis leaves Saudi Arabia in a geographic trap: exports eastward via the Persian Gulf are limited due to the situation in the Strait of Hormuz, while the western route is exposed to the growing threat from the Houthis. The pro-Iranian group has expanded its attacks on Saudi targets in recent weeks, advancing along Yemeni coasts and near Bab el-Mandeb, the maritime passage connecting the Red Sea to the Gulf of Aden. Shipping companies are forced to account for the risk to tankers reaching Saudi ports.

Market Impact and Oil Price Surges

Nevertheless, encouraging news reached the markets today. US Energy Secretary Chris Wright stated that, according to Washington's intelligence, the Saudi pipeline could resume operations within days. He noted that the US is assisting Saudi Arabia in exploring ways to maintain oil flow and find alternative export routes. Aramco has not yet published an official assessment regarding the extent of the damage, the completion date for repairs, or whether pipeline operations will resume partially at first.

Fears of prolonged supply disruptions are already rattling the markets. Brent crude rose by $2.81 today to reach $108.49 per barrel, while US oil climbed $3.29 to $104.68 per barrel. These are the highest levels recorded in nearly four months. The increases were further exacerbated by the shutdown of three oil fields in Libya, but the blow to Saudi export routes remains at the center of concerns over expanding shortages and further rises in global fuel prices.

If the pipeline indeed resumes operations within days, Saudi Arabia may quickly revive at least some shipments and ease pressure on prices. However, any delay in repairs, or additional attacks on infrastructure and shipping lanes, could turn the current cargo cancellations from a warning sign into a much wider supply crisis.