Both Ends Of The Saudi Workaround Under Fire

Saudi Arabia is pumping close to 6mb/d through the East West pipeline to Yanbu, a day after analysts said flows were nowhere near full capacity. UKMTO (Oct 4): a tanker was hit by an unidentified projectile in the Strait of Hormuz, damaging its engine room. It was the third Hormuz strike in four days, after a tanker fire on Oct 1 and an outbound tanker fire and blackout on Oct 2. Separately, UKMTO reported several explosions near a tanker 60 nautical miles south of Al Mukha, Yemen, near Bab el Mandeb. Crews were safe in both incidents. The Houthis claimed ballistic missile and drone attacks on Aramco sites in Riyadh and Khurais, saying they caused major fires. Saudi Arabia has not confirmed the claim. Khurais is one of the kingdom's largest oil fields and was hit in the 2019 Abqaiq attack. Brent closed Friday at $102.25, essentially unchanged.

The bypass was the answer to Hormuz. Pump crude west across the kingdom to Yanbu and ship it out through the Red Sea. That answer has three points of exposure: where the oil is produced, the pipeline, and the sea lane out. The Red Sea incident sits on the route Yanbu cargoes take to Asia. If Khurais is confirmed, all three are under pressure at once, and the workaround stops being a workaround. The market has spent a week discounting individual strikes. Brent was flat on Friday despite a tanker being hit two hours after the administration said the strait was open. Three Hormuz strikes in four days, a second chokepoint lighting up, and a possible hit on a major field are a different scale of problem.