Saudi Westbound Barrels Are Europe's Shortcut and It Is Now Closed

Saudi crude exports to Europe move fastest when they leave from the Red Sea rather than the Gulf, because barrels loaded on the kingdom's western coast reach European buyers through the Suez Canal instead of taking the long voyage out of the Strait of Hormuz. That western outlet exists only because the East West Pipeline carries crude across the country from the eastern fields to the coast. Drone attacks on the pipeline and the precautionary shutdown that followed have interrupted the feed into that route, leaving the port of Yanbu working from what is already there. The result is a supply question shaped by distance as much as by volume.

Alex Hodes is Director of Energy Market Strategy at StoneX, where he covers crude oil and refined product markets and authors the firm's energy commentary. He follows global supply flows, inventory balances, refinery run rates and crack spread dynamics, including the export routes that carry Saudi barrels toward Europe.

Key Themes from the Discussion

• Saudi Arabia's western outlet at Yanbu sits closer to Europe than Gulf loadings because barrels can transit the Suez Canal
• Yanbu handles refining alongside crude and diesel loadings, making it a working supply point for European buyers
• Red Sea loadings were already thinning under Houthi pressure before the East West Pipeline was shut down

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Yanbu Loadings Shorten the Voyage That Supplies Europe

The port of Yanbu on Saudi Arabia's Red Sea coast has functioned as a direct supply point for Europe, carrying refined products as well as crude. "Yanbu has been a large source of supply for Europe throughout this crisis", Hodes said of the port, which combines a refinery complex with loading facilities. Proximity is the reason, specifically the Suez Canal transit that puts Red Sea cargoes closer to European buyers than anything loaded inside the Gulf. European refiners and distributors that leaned on those cargoes are exposed to a routing problem rather than a straightforward shortage, since the same molecules leaving from the eastern side of the kingdom face a far longer journey. 

East West Pipeline Outage Cuts the Crude Feed Reaching the Red Sea

The East West Pipeline shutdown removes the mechanism that puts Saudi crude on the Red Sea coast in the first place, which is a different problem from a port being unable to load. Hodes, pointing to "the pressure that the Houthis had placed on the Red Sea itself", notes that loadings at Yanbu had already been slowing before the attacks, so the decline started from an eroded baseline rather than a full one. Stored volumes at the port allow some loadings to continue, whereas replenishing them depends on a pipeline that is out of service. As a result, the shortfall lands on refined products and not only on crude, a point he puts plainly when he says the East West Pipeline is "not only a crude issue, but it's a diesel issue as well".

 

--- Written by Gus Farrow, Senior Manager, StoneX Media

--- Expert: Alex Hodes, StoneX Director Energy Market Strategy