Saudi Arabia cancels October oil shipments to European refineries

Saudi Arabia has informed at least two European oil refining customers that they will not receive their usual crude oil allocations in October, as the escalating conflict in the Middle East disrupts global energy markets, reports Middle East Eye.

European refineries typically purchase Saudi crude under term contracts that guarantee regular monthly supplies. However, shipments can be cancelled under extraordinary circumstances under force majeure provisions, according to the report.

The development follows Qatar's extension earlier this month of force majeure on liquefied natural gas shipments until early November amid a maritime blockade of the Strait of Hormuz.

Saudi Arabia had appeared relatively insulated from disruptions around the Strait of Hormuz because its East-West Pipeline connects the Gulf to the Red Sea port of Yanbu, allowing the kingdom to bypass the strategic waterway.

The pipeline had enabled Saudi Arabia to export around two-thirds of its pre-war oil volumes, or about 4 million barrels per day, according to MEE.

However, a drone attack last week disabled the pipeline. Saudi authorities said the attack originated from Iraq, where militias aligned with Iran are active.

The Houthis have also claimed attacks targeting the port of Yanbu and other facilities operated by Saudi oil giant Aramco.

Saudi Arabia has since begun rerouting oil shipments through the Suez-Mediterranean Pipeline after the Houthis declared an embargo on Saudi shipping, the report said.

Brent crude, the international benchmark, rose following the Houthi offensive in Yemen, which has placed the group in control of the country's Red Sea coastline.

The Houthis have also targeted Saudi Arabia with drones and missiles as the kingdom carries out strikes against Houthi positions in Yemen.

Brent was trading at around $103 a barrel on Friday. However, energy analysts told MEE that the benchmark price does not fully reflect the physical cost of securing crude supplies, while prices for refined products such as diesel and jet fuel are even higher.

In the United States, which has been relatively insulated from the conflict because of its domestic energy production, diesel prices rose 7.7% over the past week, according to the report.

Saudi Arabia led a coalition of Arab states that intervened in Yemen after the Houthis seized large parts of northwestern Yemen about a decade ago.

A ceasefire was reached in 2022 between the Houthis and the internationally recognised Yemeni government, backed by Saudi Arabia, after which Riyadh sought to reduce its involvement in the conflict.

However, Saudi Arabia has maintained an air and sea blockade of Houthi-controlled ports and airports.

The Houthis have said lifting the blockade is a condition for ending their embargo on Saudi Arabia.