Saudi Arabia Is Cancelling European Crude Cargoes

The East-West pipeline closure has stopped being a Middle East story and become a European supply story.

What's happening?

Saudi Aramco is telling some European refiners their September-loading cargoes are cancelled.

Bloomberg separately reports Aramco is delaying supply to other European term customers this month, with no confirmed length yet.

Poland's ORLEN S.A. has already issued 5 crude purchase tenders in two working days, hunting for replacement barrels.

Why?

The 750-mile pipeline linking Saudi oilfields to the Red Sea port of Yanbu shut down September 11, after drone attacks launched from Iraq's Maysan province the day before.

Partial restart is expected within days.

Full repair of the damaged pumping stations could take several weeks.

With Yanbu cut off, Saudi Arabia is trying to push more crude through the Strait of Hormuz, the exact chokepoint the pipeline was built to bypass.

That route carries its own risk now too: Houthi forces control the Bab al-Mandeb Strait, the second chokepoint on the same path.

Brent is near $108 a barrel, WTI is up more than 3%, and diesel futures just hit a another high.

Mediterranean crude premiums are spiking.

Azeri Light now trades about $15 a barrel above Dated Brent, up from $10-11 just 5 days ago.

Saudi exports had already fallen to about 3 million barrels a day in August, the lowest on record since 2017.

European refiners are losing Red Sea-loaded barrels at the same moment Hormuz and Bab al-Mandeb both carry active risk.

Expect the scramble for replacement crude and the price spreads it is creating, to keep building for weeks.

Europe Buys Security By The Cargo

Russian pipeline gas to Europe is largely gone.

That forces LNG to become the marginal supply source, arriving by ship instead of by pipe.

Europe then competes for cargoes against Asia in a global market where a handful of exporters, increasingly concentrated in the US, set much of the marginal price.

Europe settles that exposure 2 ways at once: absorbing it through higher bills, subsidies and thinner margins, or adjusting consumption through efficiency, substitution and curtailment.

My take: https://themerchantsnews.substack.com/p/exxon-says-50-million-tonnes-by-2030?r=tf0g2&utm_campaign=post-expanded-share&utm_medium=web

Ukraine says it hit Russia's Syzran refinery overnight, a day after Trump claimed that Kyiv and Moscow had agreed to stop striking energy targets.

Zelenskyy says Ukraine will "support de-escalation" only once Russia stops hitting Ukrainian infrastructure first.

Peskov called a halt "a good idea," without committing to one.

Source: Bloomberg

Zelenskyy confirmed Ukraine hit Russia's Syzran refinery overnight, along with a drone production facility in Taganrog.

Both Moscow and Kyiv have now rejected Trump's claimed energy truce outright, the Kremlin calling a halt "a good idea" without agreeing to one, Kyiv saying flatly no deal exists.

At the same time, Russia's crude processing climbed to nearly 4 million barrels a day in the week of September 3-9, as several previously drone-hit refineries came back online.

Two things are true at once here.

Neither government has actually agreed to stop hitting energy targets, and Russia's refineries are proving more resilient than the "two-decade low" headlines suggested.

Repair crews are outpacing the ceasefire talk just as much as the strikes are.