Saudi Aramco Halts Crude Shipments to India Indefinitely as Pipeline Outage Enters Second Week

India Loses a Ninth of Its Oil Supply

Since Saudi Arabia shut down its East-West Pipeline on September 11 following a drone attack on its pumping stations, the fallout has widened well beyond the initial price spike. The newest hit landed on India.

Saudi Aramco has suspended crude shipments to Indian refiners indefinitely, according to Business Today, which reported the halt on September 18. That line accounted for nearly 9% of India's total crude imports. The suspension comes on top of the transit bottlenecks already choking shipments through the Strait of Hormuz, where the U.S. has maintained a naval blockade on Iranian exports since July 14.

Indian refiners insist they won't face immediate volume shortfalls, Business Today reported, but they're now leaning on spot-market ship-to-ship transfers in the Gulf of Oman, cargoes that come without the price stability or predictability of long-term Aramco contracts.

Riyadh's Detour Around Its Own Detour

The East-West Pipeline was built in the 1980s specifically to let Saudi Arabia bypass the Strait of Hormuz. Now that pipeline itself is down, and Saudi Arabia is running a detour around its own detour.

A Reuters report on September 16 said Saudi Arabia is increasing crude shipments through a port in Oman, outside the Strait of Hormuz, to soften the blow of the pipeline shutdown, according to analysis published by note.com. No volume figures were disclosed, but the market reacted anyway. WTI crude briefly fell to $99.10 a barrel on September 17, its first dip below $100 in six days, before recovering to close at $101.91, down just 1% for the day.

The 3% intraday swing that mostly reversed by the close shows where this market stands two weeks after the initial attack. Traders are on edge enough that a report with no hard numbers can move prices, but not convinced the crisis is easing.

Who's Actually Exposed

CNBC's breakdown of the four biggest Asian crude importers shows why. South Korea drew 34.1% of its crude imports from Saudi Arabia in July, per the Korea International Trade Association. Japan drew 27.3%, according to government data. China sat at 14.9%, per customs data, and India at 10.2%, according to Kpler.

Because export constraints at Hormuz had already pushed a large share of Saudi exports through the pipeline to the Red Sea port of Yanbu, Bain & Company's Thomas Luedi puts the Asia-bound volume now at risk at roughly 4 million barrels per day. CMC Markets' Oriano Lizza estimates 3.5 million to 4.5 million bpd once stored crude at Yanbu and in Egypt runs down. Kpler's Matt Smith calculates the market would lose 120 million barrels if the pipeline stays shut for a month while Yanbu's reserves are drawn down.

Lizza told CNBC that Asian refiners "feel the cost immediately and the physical shortage weeks later," pointing to widening premiums on medium-sour crude grades as the earliest sign of stress. Japan's Eneos Holdings and Idemitsu Kosan have already broken from normal buying schedules, purchasing Omani crude a full month early for October loading at a premium of $38 a barrel over the Dubai benchmark, according to BigGo Finance, which reported Omani crude futures spiking to $132.09.

Nobody Agrees on the Repair Timeline

Saudi officials have given no public timeline for reopening the pipeline. Sources who spoke to Reuters, cited by The Guardian, gave estimates ranging from a possible partial restart soon to a full six weeks before it's fully back online. Two officials who spoke to the Associated Press, also cited by The Guardian, said the pipeline would be mostly out of service for weeks.

Fox News reported repair estimates of three to five weeks, based on the pipeline's recent throughput of 2.6 million to 4 million barrels per day. BigGo Finance reported Aramco plans to restore roughly half of capacity within days, with full repairs taking about six weeks. U.S. Energy Secretary Chris Wright, meanwhile, said publicly that the disruption would be measured in days, not weeks, a notably more optimistic read than anything coming out of trader or Aramco channels.

Those estimates cannot all be right. The gap between "days" and "six weeks" is the difference between a market shrugging this off and a genuine multi-week supply crunch hitting four of the world's largest oil importers at once. Macquarie strategists told CNBC that Asian refiners' improved ability to process a broader range of crude grades should cushion the blow regardless. Morningstar's Chokwai Lee told CNBC the near-term impact will land mainly on prices and freight costs rather than a physical shortage, at least for now.

Who is actually behind the original attack remains unresolved in the sourcing. Saudi Arabia's energy ministry did not name a perpetrator when it announced the shutdown on September 11, according to the Epoch Times. Sources who spoke to Reuters, cited by The Guardian, said Saudi officials blamed drones launched by militants in Iraq, distinct from the separate Houthi advances around Mocha and the Bab al-Mandab strait happening the same week. No group has claimed responsibility for the pipeline strike itself in the sourcing reviewed here.

What happens next depends on which of those repair estimates holds. If Yanbu's five-to-seven days of remaining export stocks, cited by three industry sources to The Guardian, run out before Aramco restores even partial flow, the next country to lose contracted barrels won't be India. It will likely be whichever Asian buyer has the thinnest storage cushion left.