Towards a surge in oil and gasoline prices?

Towards an oil shortage in the coming months?

Since September 11, one of the last secure transport routes for oil extracted in the Middle East—the famous East-West pipeline controlled by Saudi Arabia—has closed following a drone attack attributed to Iranian-backed militias operating from Iraq.

This creates a very complex situation for delivering this precious black gold to strategic destinations, such as Europe, while the price of crude oil continues to rise, currently hovering around 109 dollars per barrel.

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Crude oil price

Indeed, the exact date for the return to service of this strategic pipeline remains uncertain. What is much less uncertain, however, is the amount of oil stored at the port of Yanbu—its final destination on the Red Sea coast—estimated at only 5 to 7 days of exports at most when it was shut down.

This deadline is approaching in the middle of this week according to several sources on X, including the account The Hormuz Letter, with the announced consequence: the cancellation by the state-owned oil company Saudi Aramco of "all crude oil allocations to Europe for the month of September," as well as "the cancellation of all shipments scheduled for loading from the end of September."

This means that the world's leading oil exporter is effectively withdrawing from the European market for the remainder of September and for the entire month of October. The situation amounts to a de facto force majeure on shipments of Saudi crude to Europe from the third-largest energy producer in the world.

A pipeline that could restart in a few days

Facing this critical situation, U.S. Secretary of Energy Chris Wright stated a few hours ago, on the sidelines of a G20 energy meeting in Houston, that the Saudi pipeline could finally reopen in the coming days, while also asserting that Saudi Arabia is preparing to ship more oil out of the Strait of Hormuz with the help of the U.S. military.

An estimate regarding the repairs to the Saudi pipeline that is considered a bit too optimistic by some experts interviewed by Reuters, who expect the work to take five to six weeks at a minimum, even if a partial resumption of activity is possible during that period.

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All these uncertainties regarding this strategic oil supply, estimated at between 4 and 5% of current global supply, could have even greater and more lasting repercussions on the price of fuel at the pump, which is already reaching new heights.

At the same time, the daily chartering cost for a ship transporting oil from the interior of the Persian Gulf to China has crossed the symbolic threshold of one million dollars for the very first time, according to data from the Baltic Exchange in London reported by Bloomberg, as "the war with Iran has significantly reduced the number of ships willing to cross the Strait of Hormuz to load their cargo."

Chartering cost for oil transport ships

Sources: The Hormuz Letter, Reuters