Article By Frank Bergman
American oil executives are sounding the alarm that the long-feared global fuel crisis has now arrived as supplies plunge and Saudi Arabia cuts off crude deliveries to Europe following Iran’s devastating attack on a critical pipeline.
Industry leaders had spent months warning that the prolonged shutdown of the Strait of Hormuz would eventually push global energy markets past their breaking point.
According to a report from The Wall Street Journal, those executives now say that moment has come.
Commercial fuel inventories around the world have already been draining for more than six months, while governments have little remaining room to cushion the blow by drawing further from strategic crude reserves.
The situation deteriorated dramatically after an Iranian strike knocked out a pumping station on Saudi Arabia’s East-West Pipeline, a vital route used to bypass the Strait of Hormuz.
Analysts estimate the attack has stranded at least 2.5 million barrels of crude per day.
Now, Saudi Arabia has informed European refiners that they will receive no crude under their long-term supply agreements in October.
Saudi Arabia Cuts Off Europe
The East-West Pipeline had become increasingly critical as the Hormuz crisis dragged on.
The pipeline moves Saudi crude from the kingdom’s oil-producing east to the Red Sea, allowing exports to bypass the Strait of Hormuz entirely.
With that escape route now crippled, the consequences are spreading rapidly.
Bloomberg reported Friday that Saudi Aramco has informed at least two European refining customers that they will receive no crude next month.
“Saudi Aramco told at least two oil refining customers in Europe that they will be allocated no crude next month under long-term agreements after the kingdom’s key pipeline to the Red Sea was attacked, people informed of the decision said,” Bloomberg reported.
European refiners normally receive Saudi crude through term contracts designed to guarantee regular monthly supplies.
Those deliveries are now being halted.
“European customers normally receive Saudi Arabian crude on so-called term contracts, ensuring a steady flow of supply every month,” Bloomberg reported.
“Those deliveries will not take place next month, the people said, asking not to be identified because the information isn’t public.
“The decision applies to all European buyers, they said.”
The disruption was initially expected to hit September shipments.
It has now spilled into October, with potentially serious consequences for November and beyond if Saudi Arabia cannot restore the pipeline.
‘Europe Is Facing Its Worst Energy Crisis in History’
Before the shutdown, Europe was importing approximately 577,000 barrels of Saudi crude every day.
The Kobeissi Letter warned that those supplies are now disappearing just as the continent heads toward winter.
“BREAKING: Saudi Arabia has informed European refiners that they will be allocated no crude oil next month amid the East-West pipeline shutdown, per Bloomberg,” The Kobeissi Letter wrote.
“European customers normally receive Saudi Arabian crude oil shipments on ‘term contracts,’ which are meant to ensure a steady flow of crude oil supply every month.
“Countries in Europe imported 577,000 barrels of crude oil per day from Saudi Arabia prior to the shutdown.
“Europe is facing its worst energy crisis in history.”
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