Saudi Arabia halts October crude deliveries to some European refineries

Will Bain (0:01)

Could there be more trouble ahead for global oil supplies?

Kit Haines (0:05)

You're getting less volume to the Saudi East Coast, but they're maximizing the volumes out of the West Coast. It's likely, given the uncertainty with the pipeline flows, that this could continue.

Will Bain (0:15)

This is World Business Report from the BBC World Service. I'm Will Bain, and we'll hear about the difficult decisions being posed to the world's biggest oil company and what that might mean for further price pressure for the rest of us. Also on the programme, a new Buffett at the top of the world's biggest investment companies will explain all. And as a slice of Americana heads for London's Wembley Stadium, just why do US sports leagues seem so set on global expansion?

Yeah, great to have you company. All that to come on World Business Report over the next half hour. We're going to start, though, with another warning about what might be in store for global oil markets in the weeks ahead, because the biggest oil company in the world, Saudi Arabia's Saudi Aramco, is apparently warning it might not be able to keep all its customers happy. Kit Haines is head of oil at the consultancy firm Energy Aspects and explained a bit more.

Kit Haines (1:13)

Well, the challenge for Saudi Arabia is that, you know, they're trying to keep all of their customers happy at a time where it's very, very difficult for them to get their crude oil out because you've got the Babel Mandep issues with the Houthis and also the Hormuz issues with what's going on with Iran. So what we've had, because of the Saudis' flexibility, they have this east to west pipeline, so they can either ship out of the east coast or the west coast. The priority recently has been more volumes out of the east coast, which has benefited Europe. The issue is here that following the attacks around a week ago, beauty attacks on the pipeline, on the pumping stations, it means you've had to swing that back to the west coast, and the west coast is going to be far more appropriate for supplying Asian buyers.

So that's the issue that we're seeing at the moment. With the pumping stations down, you're getting less volume to the Saudi east coast, but they're maximizing the volumes out of the west coast to Asian buyers.

Will Bain (2:12)

So is it as simple as that? Is it pragmatism or is there also pressure politically as well coming from some of those other countries, some of those key buyers?

Kit Haines (2:20)

So the way Aramco operates is, they have term contracts with buyers from all over the world. And typically within a year, you buy a certain amount of crude, right? And with the challenges we've seen with getting oil out of Hormuz, it means a lot of the Asian buyers have had less of their contracts this year, while Europe's been getting pretty good amounts. So in terms of that, in terms of their dynamic, then they do need to supply more crude to, I would say particularly China, maybe some to India as well.

They will be the two big ones. So that's probably their priority right now.

Will Bain (2:53)

Interesting. And so what does it mean for Europe? No deliveries at all from what I've read in October. One, is that right? That sort of timeframe of the company firm that up? And two, can you give us a sense of the significance in terms of the volume of supply and sort of rough percentage terms that Aramco is giving to European economies?

Kit Haines (3:12)

Yeah, so I think it's not entirely true that every single barrel has been cut off because there are still some ships in the Red Sea that are due to load. So there will be small volumes going into Europe, and some countries may be applied as well by inventory from storage sites. So there is a little bit of flexibility. What they've said is that there's no October loading crews, I think, going into Europe. So that's kind of the next cycle. So I think that's the key issue for Europe as well. We've seen a bit of a scramble in the North Sea markets where buyers have tried to kind of chase that this week to get more crude coming in. So it looks like most of the buyers have covered for that outage, but it's likely, you know, given the challenges, given the uncertainty with the pipeline flows, that this could continue later into the year as well.

Will Bain (4:03)

And then to global prices, I guess, which is the other for everybody listening around the world, whether they're at the end of those supply chains or not. The other kind of key bit to all of this, we'd seen the oil price tack back a little bit through the week, Hammeh, from highs of 108, 109 at the start of the week, coming back towards 104 What do you expect the impact on that to be into next week?