Saudi Aramco has told its European term customers that they will receive no Saudi crude in October. Bloomberg reported that at least two European refiners were notified of zero allocations, and people familiar with the decision said it applies to all European term buyers.
The move comes as Saudi Arabia seeks to bring roughly 60 million barrels back to market after flows were disrupted by damage to the East-West pipeline. That line had been moving 4 million to 5 million barrels per day across the kingdom to Yanbu, bypassing the Strait of Hormuz. From there, crude could move through Egypt’s SUMED system to Sidi Kerir on the Mediterranean, giving European refiners access to Saudi barrels without entering the Gulf.
The pipeline attack halted that route, leaving Europe scrambling for alternatives. At the same time, Aramco has sold about 60 million barrels from its Persian Gulf export terminal at Ras Tanura for September and October loading. Those cargoes will pass through Hormuz and undergo ship-to-ship transfers near Sohar, Oman.
That arrangement puts around 1 million to 1.5 million barrels per day of Saudi exports back into the market, but the buyers are in China, South Korea, India and Japan rather than Europe. For European refiners, the challenge is that Gulf barrels moving west must either pass through Hormuz and the Red Sea, where shipping has also come under attack, or take a nearly five-week voyage around Africa.
Oil markets have reacted accordingly. On Friday, Brent was trading around $104.30 and WTI near $102, well below the level above $108 seen for Brent earlier in the week. At the same time, Dated Brent, the benchmark for physical crude in Europe, climbed above $130 this week.
Poland’s Orlen had already turned to North Sea barrels and was seeking U.S. and Kazakh crude after Saudi September cargoes were delayed or canceled. U.S. Energy Secretary Chris Wright said on Tuesday that crude should begin flowing through the East-West pipeline within days. Aramco is indeed targeting a return to about half capacity within days, but a full recovery is unlikely for another six weeks.
The result is that Saudi Arabia has found a partial outlet for crude stranded by the damaged pipeline, but the near-term winners are Asian buyers, while Europe is left without Saudi term crude for October.
