Traders took a breath after Saudi Arabia rerouted part of its crude flows through the Strait of Hormuz, dialing back worries that a pipeline shutdown would choke global supply. According to Reuters, Riyadh has made additional crude available to Asian refiners by arranging vessel-to-vessel loadings in waters near Oman's Sohar port, just beyond the Strait of Hormuz.
Industry sources told Reuters that crude loadings at the Yanbu export terminal on the Red Sea were halted earlier this week, and that Riyadh canceled some shipments to European buyers. Following U.S. and Israeli attacks in late February, Iran began blocking the Strait of Hormuz. In response, Saudi Arabia has leaned on Yanbu as its primary channel for oil exports.
U.S. Energy Secretary Chris Wright told CNBC on Tuesday the East-West pipeline problem was a "brief and temporary interruption" that "will be measured in days." He said Saudi Arabia took "quick action" to push more barrels through Hormuz with support from the U.S. military. Rapidan Energy expects Saudi crude exports to be about 400,000 barrels per day lower this month, with some of the shortfall from Yanbu offset by higher shipments through the Gulf and Hormuz.
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Even with today's dip, crude is still up more than 12% for the month. Rerouting is smoothing some of the rough edges for now, but Rapidan warned that "risk remains skewed toward a larger disruption if the pipeline outage extends past September or Iran, the Houthis, or other proxy groups escalate attacks." Translation for your wallet: energy prices can still whip around, and anything in your mix tied to oil could swing with them.
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