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Saudi Petroline Disruption Poses 4 Potential Outcomes for Oil Markets, Kpler Says

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The disruption at Saudi Arabia's East-West pipeline, also dubbed Petroline, could follow four paths, from a partial recovery within weeks to a prolonged shutdown that could leave Hormuz as the key export route, Homayoun Falakshahi, head of crude analysis at Kpler, said in a Tuesday note.

The pipeline itself remains largely intact, but severe damage to a pumping station could take four to six weeks to repair, Falakshahi said.

Aramco has reportedly started building a bypass around the damaged station, while minor pipeline damage has already been repaired.

Petroline supplied about 1.8 million barrels per day of refinery feedstock and 3.6 million b/d of oil loadings from Yanbu terminals during September to date.

Yanbu loadings rose 1.1 million b/d to 3.6 million b/d through September, while Saudi Gulf loadings increased nearly 2 million b/d to 2.46 million b/d.

Saudi crude shipments through Hormuz without ship-to-ship transfers remain near 600,000 b/d, while Gulf of Oman ship-to-ship flows climbed 1.1 million b/d to 2.5 million b/d month to date, Kpler data showed.

Kpler assigns a 50% probability to its base case, which sees Petroline operations return within six weeks at about 50% of the pre-attack rate.

Under that scenario, West Coast refineries would cut runs and draw inventories, while Aramco would redirect more crude toward East Coast terminals such as Ras Tanura and Juaymah.

Petroline carried an estimated 5.4 million b/d to 5.5 million b/d before the attacks, and a partial recovery could reduce Yanbu exports by 2.5 million b/d to 2.7 million b/d if Aramco prioritizes domestic refinery demand.

Yanbu terminal stocks stand at about 9 million barrels, while other West Coast refinery inventories total 16.5 million barrels, enough for roughly three and nine days of cover.

Higher Ras Tanura loadings could offset some supply losses to Asia, while West-of-Suez deliveries would require about one additional month of travel.

The base case would pull prompt Dubai premiums back from extreme levels while keeping the structure supported, with Murban's premium gradually narrowing, Falakshahi said.

Kpler assigns a 30% probability to a relief scenario, where Aramco could install a temporary bypass within about 10 days and restore Petroline to full throughput.

That outcome would limit disruption to Red Sea exports and West Coast refinery runs, while easing regional tensions could also weaken prompt Dubai premiums and the November-December spread.

Kpler gives a 20% probability to an escalation scenario in which repeated attacks prevent repairs for six months or damage additional pumping infrastructure or Yanbu terminals.

A prolonged outage could exhaust West Coast inventory buffers, while attacks on Abqaiq could remove more Saudi production for several months and intensify competition for remaining global supplies.

Riyadh could expand military operations into Yemen and potentially strike Iranian proxies in Iraq, while the scenario could also disrupt the Bab el-Mandeb passage and affect Ain Sukhna operations, Falakshahi said.

Such an outcome could push oil prices sharply higher, prompting the US to restore sanctions waivers for Russian crude and consider easing its Iranian naval blockade.

Dubai premiums could rise well above $40/bbl, while Brent could climb past $130/bbl before the US eases its naval blockade.

In the most severe scenario, Petroline could remain offline while Yanbu and Muajjiz inventories drain within one to two weeks, leaving Saudi Arabia dependent on Hormuz and making safe tanker passage the key constraint.

Ras Tanura holds 11.4 million barrels at 51% capacity and Juaymah 16.9 million barrels at 67%, leaving about 20 million barrels of spare storage, but Kpler said shipping those barrels would depend on Hormuz access.

The beyond-escalation scenario would provide the strongest support for Dubai premiums, with Murban-Dubai likely widening further as Saudi barrels face greater Hormuz transit risk, Falakshahi said.

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US Oil Update: Futures Rise on Saudi Pipeline Attack, Vessel Strikes

Crude futures settled higher in after-hours trading on Monday as strikes on Saudi Arabia's East-West pipeline and attacks on vessels in the Strait of Hormuz heightened fears of severe, long-term global supply disruptions.Front-month West Texas Intermediate futures gained 1.8% to $101.89 per barrel, while Brent futures were up 1.7% to $106.39/bbl.Saudi Arabia has shut down the 7 million barrels per day pipeline, ING strategists said, adding that it's unclear how severe any potential damage is or how long it will be out of action.On Friday, Saudi Arabia shut its East-West oil pipeline as a precaution after it came under multiple attacks in the Riyadh and Medina regions.The pipeline has served as a critical alternative to the Strait of Hormuz, and Gelber & Associates analysts said its closure threatens exports from Yanbu if repairs extend beyond the port's limited inventory buffer."The relatively contained price reaction suggests the market still expects Saudi inventories to cushion exports in the near term, but if the disruption extends beyond the five-to-seven-day inventory cushion, that could change quickly," said Janiv Shah, vice president, commodity markets - Oil at Rystad Energy.On the supply front, President Trump said on Monday that crude was flowing through the Hormuz and that countries benefiting from the strategic waterway's security should reimburse the US for the costs of protecting it.The latest data from Windward showed that 17 vessels crossed the strait as of Sunday, comprising 10 inbound transits along the southern US-assisted lane and seven on the northern Iranian-controlled lane.Iran's Islamic Revolutionary Guard Corps said on Monday said that supertanker "Algaya" exploded after striking naval mines as the vessel tried to transit the Hormuz through a restricted zone south of the strategic waterway.The US President also claimed that Iran wants to reach a deal with the US, while making clear that he would decide whether Washington would negotiate."The failing Nation of Iran wants to make a deal, quickly and badly," Trump said in a social media post on Truth Social. "I will determine whether or not the US will choose to engage..."Meanwhile, a meeting between Iran and the six-member bloc of Gulf countries to discuss the situation in Hormuz, originally scheduled to take place Monday in Oman, has been postponed after the attack on the pipeline.Esmaeil Baqaei, spokesperson of Iran's Ministry of Foreign Affairs, said in televised remarks on Monday that Saudi Arabia's request to postpone the regional summit and attribute it to developments in Yemen is "a diversion from the root causes of this crisis."ING strategist said that the delay in the meeting between Iran and Gulf states pushes any prospect of de-escalation even further out of reach.

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Crude Tanker Rates Hit New Highs as Hormuz Attacks Raise Shipping Risks, Kpler Says

Crude tanker rates hit new highs as escalating attacks in the Persian Gulf and Strait of Hormuz push shipping risks higher, Kpler said Monday.About 24 successful strikes have emerged over the past two weeks, with eight attributed to the US and the rest to Iran, sharply raising risks for crude shipping.Despite the attacks, US Navy convoys continue moving Gulf barrels, while owners and charterers remain willing to load under escort as higher risks translate into steeper freight costs.Very Large Crude Carrier freight from the Middle East Gulf to China reached $24 per barrel, while Gulf of Oman cargoes climbed to $12/bbl.Freight now accounts for 25% of crude value on Middle East Gulf shipments, up from 17% when the conflict began and about 5% before the war, Kpler said.For Gulf of Oman cargoes, freight represents 11% of crude value, showing how shipping costs increasingly determine the delivered price Asian refiners pay.Tanker rates outside the Middle East also reached their highest levels of the year as owners position ships for Gulf employment, leaving Atlantic Basin buyers competing harder for vessels.That competition is spreading the Hormuz risk premium across global tanker routes, even where ships have no direct exposure to the Strait, Kpler said.Kpler expects tanker rates to stabilize in the coming days, as another major increase in geopolitical risk would likely push the market toward fewer Gulf loadings instead of higher freight.Continued attacks could therefore reduce crude availability and Gulf tanker demand rather than trigger another proportional freight surge, creating a ceiling for rates despite elevated shipping risks.Higher freight costs are also pressuring Asian refiners, which need stronger refined-product margins to offset rising crude delivery expenses from the Middle East Gulf and Gulf of Oman.Refiners unable to pass those added costs to fuel buyers could face weaker economics, extending the tanker market squeeze across the broader oil complex, Kpler said.

Oil & Energy

Saudi Oil Exports Could Fall Up to 4 Million B/d if Pipeline Outage Persists, Kpler Says

A prolonged outage on Saudi Arabia's East-West pipeline could ultimately reduce Saudi crude exports by roughly 3.5 million to 4 million barrels per day, depending on the extent and duration of the disruption, Kpler analyst Amena Bakr said in a Monday note.A suspected Iraq-based drone attack on the pipeline has exposed a growing vulnerability in the region's oil infrastructure, bringing the conflict closer to facilities critical to global crude supplies, Bakr said.Industry sources told Kpler that the Sept. 10 attack struck the pipeline at multiple locations and caused significant damage to at least one pumping station. Saudi Arabia's Energy Ministry later confirmed it had shut down the pipeline as a precaution.The 1,200-kilometer Petroline carries crude from Saudi Arabia's eastern producing regions to Yanbu on the Red Sea. With a nameplate capacity of about 7 million b/d, it provides Saudi Arabia with its principal alternative to exports through the Strait of Hormuz.Saudi Aramco has continued meeting customer commitments without declaring force majeure, drawing on inventories held around the world. However, the Red Sea buffer is shrinking.Kpler estimates Yanbu crude inventories at less than 15 million barrels, down from almost 21 million in July and close to their lowest level since 2018.Satellite imagery confirmed two very large crude carriers loading at Saudi Arabia's west coast terminals on Sept. 10, with five additional tankers reportedly expected to load.However, Bakr noted that visibility is becoming increasingly difficult as vessels increasingly switch off their AIS transponders while loading at Saudi west coast terminals, a practice that is also becoming more common in the Middle East Gulf.The attack has also raised the risk of a wider confrontation. Saudi Arabia said the drones originated from Iraq, while stressing that this did not mean the Iraqi government was responsible.Riyadh said it would not retaliate "at this stage," giving Baghdad time to prevent further attacks, but reserved the right to respond.The alternative routes for escalation carry their own risks. Further action against Iran-aligned militias could draw the US deeper into Iraq, while escalation against Yemen's Houthis could threaten Red Sea shipping. Direct strikes on Iran could put the Strait of Hormuz at greater risk.The broader concern is that attacks are moving closer to oil-producing infrastructure. Damage to major processing facilities or producing fields would represent a far greater threat to global supply."The global oil market cannot absorb that progression indefinitely. Either escalation produces an off-ramp, or it produces a larger supply shock that finally forces one," Bakr said.