Saudi Arabia halts October crude deliveries to some European refineries

World Business Report

The episode examines significant shifts in global energy markets, specifically focusing on how Saudi Aramco is redirecting crude oil deliveries

Key takeaways

• Saudi Aramco is prioritizing West Coast deliveries to Asian buyers like China and India due to pipeline attacks near the East Coast.
• US diesel prices have reached record highs, creating economic pressure on farming and shipping sectors.

Main topics

• Saudi Arabian oil supply disruptions
• Berkshire Hathaway leadership succession

Notable quotes

He taught us to find a dollar bill that you could buy for 50 cents.

Conclusion

The episode illustrates how geopolitical instability, leadership chang

Transcript preview

Speaker 6 (0:00) This BBC podcast is supported by ads outside the UK. Speaker 6 (0:39) Welcome to the Haunted Library. Have you come in search of a tale? This podcast invites you to browse the shelves and find stories that will linger long after you've left this place. From gothic masterpieces to pulpy penny dreadfuls, join me, Colin Morgan, with new episodes twice a week. Find the Haunted Library wherever you get your podcasts. Speaker 4 (1:09) Could there be more trouble ahead for global oil supplies? You're getting less volume to the Saudi East Coast, but they're maximising the volumes out of the West Coast. It's likely, given the uncertainty with the pipeline flows, that this could continue. This is World Business Report from the BBC World Service. Speaker 5 (1:29) 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. We'll 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? Speaker 5 (1:58) Yeah, great to have your 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 Haynes is head of oil at the consultancy firm Energy Aspects and explained a bit more. Speaker 4 (2:21) 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 Bab al-Mandeb 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, the 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 maximising the volumes out of the West Coast to Asian buyers. So Speaker 5 (3:21) 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? Speaker 4 (3:28) So the way Aramco operates is, you know, 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. Speaker 5 (4:01) 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? Speaker 4 (4:20) 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 supplied 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 crudes, 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. Given the challenges, given the uncertainty with the pipeline flows, that this could continue later into the year as well. Speaker 5 (5:12) 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, haven't we, from highs of sort 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? Speaker 4 (5:33) Well, I think the reason we had a little bit of a pullback there is because initially most people priced in the drop in exports from the Saudi East Coast, expecting that to be a net negative on Saudi production. But what had already started happening and a lot of people missed is that they were increasing exports from the West Coast. So on balance, I think you've had more of a realization from the market that actually Saudi Arabia is still pushing oil out. I think Still, you know, even with that dynamic, just kind of the big picture global issues, we haven't solved anything. We still have problems with shipping through the Bab el-Mandeb and the Strait of Hormuz. So both of these have not been resolved. There doesn't look like any clear or structural solutions to that in the near term. You know, there's a lot of negotiations still obviously going on. But without any solutions there, we still have a structural deficit of crude oil. And I think what we've seen throughout this year is, you know, we've been able to patch that in certain areas with things like SPR, with, you know, pretty big run cuts in places like China. We can't do that anymore. So we're still going to continue to ratchet up in price until we get to a level that really starts to slow down the market. Speaker 5 (6:48) Our thanks to Kit Haynes, the head of oil at the consultancy Energy Aspects there. Well, as always, on a Friday, we're joined live from New York by Chris Lowe from FHM Financial. Hello, Chris. How are you? Very well, Will. So the oil price, even since I did that interview a few hours ago, has tacked back again. And yet in that last set of answers there that Kit gave us, Chris, nothing solved, pressure ahead. What's going on? Why is the oil price backing off? Speaker 3 (7:14) Well, no, he's exactly right. The oil price is backing off, I think, for what Kit said. It wasn't until... Really, the last couple of days that we started hearing about