Hope, like oil, floats.
Brent was on track Tuesday for a fifth consecutive decline amid reports that the Saudis were running tests on the East-West pipeline ahead of a possible restart.
Flows through the conduit, which connects Abqaiq, the Mecca of global oil processing, to the Red Sea port of Yanbu, were shut off early this month after drones launched from Iraq damaged three of the line’s 11 pumping stations. The attack threatened to take 4% of global supply offline at a time when the world could ill afford to spare it.
The gravity of the situation hit home late last week when Aramco informed customers in Europe they wouldn’t be receiving allocations under term contracts next month. The subsequent scramble for alternative supplies found European refiners driving premiums for substitute product — namely Norwegian grades — to wild extremes.
The figure above gives you a sense of how important the East-West line, which bisects the Kingdom and bypasses the throttled Strait of Hormuz, had become to Riyadh this year. The line was maxed out at around 4 million barrels per day during the worst of the hostilities in the Gulf.
Between the Houthis’ July moratorium on Saudi oil tankers in the Red Sea and the September 10 drone attacks (which, “official” denials notwithstanding, emanated from either Kata’ib Hezbollah or Harakat al-Nujaba), Iran demonstrated the IRGC’s capacity to disrupt the Hormuz workaround.
Shortly after reports that Aramco could resume flows through the pipeline as soon as this week, sources told Reuters that in fact, the Saudis restarted operations on Tuesday. Exports from Yanbu were set resume within hours.
As the simple figure shows, oil — paper oil, anyway — traded below $100 for the first time since the drone attacks.
Reuters’ sources said the line was pumping “at a low rate after its restart” and one person described as a “security” official said it’ll likely be “weeks” before Aramco’s able to bring the pumping rate back up to 4 million barrels per day.
Meanwhile, Kyodo said Iran conveyed to the Trump administration an offer to reopen the Strait of Hormuz “within seven days” if the US “takes initial steps” toward ending the US military blockade of Iranian ports.
Although Kyodo’s source in the Iranian government “ruled out a meeting between Masoud Pezeshkian and Donald Trump” at the UN, he (and yes, the source is surely a “he”) said that if The White House is “serious and committed” to diplomacy, an agreement on ending the war’s possible.
I reckon Trump should take a hint, where that means grab the olive branch. His single-issue approval rating on inflation was just 24% in the latest big-name national poll, conducted by Fox.
I paid nearly $80 to fill up the 5 series yesterday. As Trump himself put it in June, the last time he brought peace to the Mideast, “Let the oil flow!”
