Saudi Arabia is at risk of losing oil reserves for export unless it restarts its main pipeline to the Red Sea in the coming days. According to buyers and Saudi oil traders, the shutdown of this pipeline could result in a decrease of up to 4% in global oil supply. A further reduction in Saudi oil flow will exacerbate the global supply crisis that has already driven fuel prices to their highest levels.
Pipeline Status and Its Impacts
Since the drone attacks that halted the major east-to-west pipeline in Saudi Arabia on Friday, Riyadh has not provided complete information about the extent of the damage or the timeline for reopening the pipeline. Sources familiar with the Saudi export situation have provided varying estimates. One source indicated that repairs might take five to six weeks, while another source suggested that repairs could be completed more quickly and oil flow could resume partially during repairs.
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Saudi Reserves and Export Capacities
Saudi Arabia has informed OPEC that the country's oil production in August has decreased to 6.2 million barrels per day, while in February, before the war began, production had reached 10.9 million barrels per day. The storage capacity at the Yanbu port, which serves as the main export destination for Saudi oil, is about 35 million barrels. However, due to the pipeline shutdown, Yanbu's reserves can only sustain exports for five to seven days. Additionally, Saudi Arabia has reserves to supply its customers from ports in Egypt, but these reserves are also limited.
As the world's largest oil exporter, Saudi Arabia was producing about 22 million barrels of oil per day before the war. However, oil flow through the Strait of Hormuz has decreased to 6 to 9 million barrels per day. According to the International Energy Agency, global oil supply this year will face a reduction of 5.7 million barrels per day or about 6%. Furthermore, threats from Yemeni groups and their control over islands at the mouth of the Red Sea have raised further concerns for Saudi oil transportation.
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