Saudi Pipeline Restart Fails to End Oil Market Tightness

Saudi Pipeline Restart Fails to End Oil Market Tightness

Tom Kool

Tue, September 22, 2026 at 7:10 PM GMT+3 6 min read

• CL=F -1.39%
• TTE -0.22%

Saudi pipeline flows resume, but soaring freight and diesel prices signal persistent oil market tightness.

Oil Freight Costs Explode as Gulf Risk Traps the VLCC Fleet

- The ultimate showdown of the US-Iran conflict seems to be unfolding in the freight market as costs of VLCC tankers continue to push higher into uncharted territory, with stranded Gulf vessels triggering a worldwide shortage of long-haul ships.

- For shippers eager 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 an astonishing rate of $75 million, equivalent to $38 per barrel, with this week seeing similar offers jump closer to $100 million.

- Unprecedented VLCC rates are pushing Asian refiners to buy smaller parcels for long-distance voyages, with Chinese refiners importing Brazilian crude switching 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.

Market Movers

- Apollo Global Management is evaluating a full or partial sale of Energos Infrastructure – operating 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%.
- Global trading firm 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), marking another high-impact entry into the shipping industry.

- French oil major 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.

- Japan's leading gas company Osaka Gas (TYO:9532) has 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.

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

Tuesday, September 22, 2026

The restart of Saudi Aramco's East-West pipeline has provided a lifeline to oil market bears, with industry watchers striving to understand how much crude Saudi Arabia could export with several pumping stations still under repairs. Whilst ICE Brent futures slid towards the $100 per barrel mark, unprecedented freight rates and relentlessly rising diesel prices still point towards structural tightness ahead.

Saudi Arabia Restarts Its Critical Hormuz Bypass. Saudi Arabia's 7 million b/d East-West Pipeline resumed pumping at a low rate after an 11-day shutdown, potentially allowing Yanbu exports to restart, but restoring the pre-attack flow of around 4 million b/d could take six to eight weeks.

China Eyes US Crude Tariff Cut Before Summit. Chinese refiners expect Beijing to reduce its 20% crude oil tariff during Xi Jinping's Washington visit; potentially reviving imports halted since May 2025 as Chinese importers of LNG have silently resumed purchases of US liquefied gas in July.

Trump Defies Calls to Attack Houthis. As Yemen's Houthis close in on the country's stronghold city of Taizz, US President Trump offered no direct military pledge to the Saudi-backed president, 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, signalling further delays to subsequent projects such as the NFS expansion after NFE's initial commissioning in the summer of 2026 was disrupted by the US-Iran conflict.

Drone Strike Halts Russia's Moscow Refinery. Defying Trump's calls for an Energy truce, Ukraine's drone strikes struck the 230,000 b/d Moscow refinery, damaging both primary distillation units and halting all crude processing as reports suggest the plant would require several weeks of repairs.

Rhine Nears Record Low as Winter Fuel Demand Rises. Water levels at Germany's 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.

Renewables Buildout Falls Short of 2030 Goal. 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 allow for tripling global capacity to 11 TW.

India's Power Plants Face Critical Coal Shortages. Nearly 40% of India's fleet of coal generation capacity – some 74 plants —held less than 25% of required coal stocks (three days' worth of fuel consumption) as counter-seasonal heat boosted electricity demand amidst a weak monsoon season.

Petrobras Finds High-Quality Oil in New Frontier. Brazil's state oil firm Petrobras (NYSE:PBR) stated that crude discovered at the Morpho well in the offshore Foz do Amazonas basin, believed to be one of the largest untapped oil frontiers globally, could be superior in quality to Brazil's pre-salt oil.

Newsom Approves E15 to Ease Record Gasoline Costs. California authorized immediate sales of fuel containing 15% ethanol as pump prices approached $6.19 per gallon, with the change supporting corn and ethanol producers, sparking some 650 million gallons of additional annual ethanol demand.

Glencore to Pursue Giant Fraud Claim. A UK court allowed Glencore's (LON:GLEN) fraud case against bankrupt refiner Prax to proceed, allowing the trading giant to reclaim its $267 million loss due to unpaid crude and VGO deliveries; however, any recovery would it rank behind the UK government.

Germany Faces Critically Low Gas Stocks. Germany's gas market operator THE launched tenders for Q1 2027 gas deliveries, seeking to incentivize traders to store as the country's inventories fell to a record seasonal low of 56.6%, seeking to secure volumes for peak winter demand.

Libya's Key Upstream Asset Halts Production. 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 Calls on G7 to Release More SPRs. 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.

China Restocking Pushes Copper Higher. Copper rose for a 6th session as Chinese buyers boosted buying ahead of upcoming 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.

By Tom Kool for Oilprice.com

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