The Saudi and Houthi situation is escalating. Crude oil prices spiked following last week’s East-to-West pipeline attack by the Houthis. On Friday, oil traders learned that shipments were being canceled to Europe, and Reuters reported it today.
So what’s going on?
East-to-West pipeline is rumored to be out for a few weeks (4-6). Shipments as late as early November have been canceled.
Tankers set to load Saudi crude have started moving toward the US.
US crude exports are about to surge just as refineries go into maintenance season. US commercial crude storage will hit operational minimums in mid-November if no SPR release is announced.
Yanbu crude loading will drop to zero by the end of this week as onshore storage runs out. Saudi will prioritize crude exports in the East (using the shuttle trade through the Oman lane).
Geopolitical Situation
The current geopolitical backdrop is very tense. I have followed an OSINT account called MenchOsint, and he is excellent. I highly recommend him.
In his latest update, you can see how many territories the Houthis have gained.
Source: MenchOsint
In particular, the Houthis gained control of the port of Mokha, which gives them more coverage of the Bab Al-Mandeb. This was a vital port, as it now gives the Houthis more visibility and operational dominance over the Strait.
For the Saudis, they have relied on their air force, conducting 58 airstrikes on September 13, 54 airstrikes yesterday, and 52 airstrikes today.
So far, the back-and-forth has only led to further escalation, which is likely to continue. It is anyone’s guess whether more energy infrastructure will be targeted, but the eastern side of Saudi Arabia is heavily guarded, so it will be difficult to penetrate the defenses.
That’s where we are on the geopolitical front.