Saudi Pipeline Restart Fails to End Oil Market Tightness

Saudi Arabia's 7 million b/d East-West pipeline resumed pumping at a low rate after an 11-day shutdown, but ICE Brent futures slid toward $100 per barrel on Tuesday as unprecedented freight rates and relentlessly rising diesel prices pointed to structural tightness ahead.

Restoring the pipeline's pre-attack flow of around 4 million b/d could take six to eight weeks, according to industry watchers, with several pumping stations still under repair. The restart potentially allows exports from Yanbu to resume, giving oil market bears a lifeline. How much crude Saudi Arabia can actually export remains the key question.

Freight Costs Explode

The US-Iran conflict is playing out in the freight market. VLCC tanker costs continue to push higher into uncharted territory, with stranded Gulf vessels triggering a worldwide shortage of long-haul ships.

For shippers willing to risk a voyage into the Persian Gulf, reward was never sweeter. Daily earnings on a Gulf-to-China route soared to $1.2 million this week, with Saudi Arabia's rising supplies straining tanker availability even further.

French oil giant TotalEnergies fixed the Kuwait Prosperity tanker last week at a rate of $75 million — equivalent to $38 per barrel — and this week has seen similar offers jump closer to $100 million.

Unprecedented VLCC rates are pushing Asian refiners to buy smaller parcels for long-distance voyages. Chinese refiners importing Brazilian crude have switched from VLCCs to 1-million-barrel Suezmaxes.

Bloomberg notes that freight now makes up at least 25% of the total cost of crude delivered to Asia, up from 5-6% in 2025, greatly eating into prospective profits of oil companies.

China Eyes US Crude Tariff Cut

Chinese refiners expect Beijing to reduce its 20% crude oil tariff during Xi Jinping's Washington visit. The move could revive imports halted since May 2025. Chinese importers of LNG have already silently resumed purchases of US liquefied gas in July.

US President Trump offered no direct military pledge to the Saudi-backed Yemeni president as Houthis close in on the stronghold city of Taizz, suggesting Houthi control of Bab el-Mandeb would remain in place for longer than assumed.

Hormuz Crisis Threatens Qatar's LNG Expansion

QatarEnergy said it expects its first North Field East train online in early 2027, signaling further delays to subsequent projects such as the NFS expansion. NFE's initial commissioning in the summer of 2026 was disrupted by the US-Iran conflict.

Ukraine's drone strikes hit Russia's 230,000 b/d Moscow refinery, damaging both primary distillation units and halting all crude processing. Reports suggest the plant would require several weeks of repairs, defying Trump's calls for an energy truce.

In Germany, water levels at the key Kaub chokepoint on the River Rhine are forecast to fall to 6 cm this week, halting all navigation of standard barges along the Upper Rhine and severely restricting diesel deliveries ahead of winter.

Market Movers

Apollo Global Management is evaluating a full or partial sale of Energos Infrastructure — operator of 13 floating LNG vessels — at a valuation of more than $3 billion, with ADNOC's investment arm reportedly keen to buy a stake of up to 50%.

Trafigura has established its own dedicated shipping firm, Volare, operating a fleet of 14 VLCCs, six currently with 8 newbuilds scheduled for delivery over 2026-2028.

TotalEnergies (NYSE:TTE) signed a deal with BlackRock's Global Infrastructure Partners for a $1.8 billion capital injection into the latter's oil and gas projects in Africa, to be paid back as a tariff over the next 15 years.

Osaka Gas (TYO:9532) agreed to buy a 5% stake in the Browse gas project offshore western Australia from BP (NYSE:BP), boosting its equity portfolio by 0.55 mtpa of LNG supply.

ONGC (NSE:ONGC) announced a gas discovery in the deepwater Mahanadi Basin east of Odisha state, drilling the MDW-28 well to a total depth of 1,623 meters.

Supply Disruptions Mount

Libya's largest oil field, the 340,000 b/d El Sharara project, shut 65% of its output following a tribal dispute over leadership changes at Waha Oil, which prompted the closure of the pipeline to Zawia — the second such high-impact dispute in a month.

France's President Macron said he would convene a G7 summit to discuss another coordinated release of OECD strategic petroleum stocks, following the record 400-million-barrel drawdown agreed in March, as Paris seeks to avoid fuel price protests.

California authorized immediate sales of fuel containing 15% ethanol as pump prices approached $6.19 per gallon, supporting corn and ethanol producers with some 650 million gallons of additional annual ethanol demand.

Germany's gas market operator THE launched tenders for Q1 2027 gas deliveries after inventories fell to a record seasonal low of 56.6%, seeking to secure volumes for peak winter demand.

A UK court allowed Glencore's (LON:GLEN) fraud case against bankrupt refiner Prax to proceed, enabling the trading giant to reclaim its $267 million loss from unpaid crude and VGO deliveries — though any recovery would rank behind the UK government.

Brazil's Petrobras (NYSE:PBR) stated that crude discovered at the Morpho well in the offshore Foz do Amazonas basin could be superior in quality to Brazil's pre-salt oil.

Copper and Coal Stress

Copper rose for a sixth session as Chinese buyers boosted purchases ahead of the mid-Autumn holidays and expected smelter shutdowns, pushing the LME three-month contract to $14,766 per tonne on Tuesday — less than $100/mt short of a record.

Nearly 40% of India's coal-fired fleet — some 74 plants — held less than 25% of required coal stocks, three days' worth of fuel consumption, as counter-seasonal heat boosted electricity demand during a weak monsoon season.

According to the International Renewable Energy Agency, global additions of clean energy reached a record 693 GW in 2025, but annual installations must rise to around 1.2 TW over the next five years to triple global capacity to 11 TW.

With the pipeline restart slow, Gulf freight at record highs, and diesel tightness worsening into winter, oil buyers face weeks of squeezed margins before any relief arrives.