Aramco Tells Europe Its October Crude Allocation Is Zero

Saudi Aramco has told its European term customers they will receive no Saudi crude in October, Bloomberg reported Friday, with people familiar saying the zero allocation applies to all European term buyers. It is the sharpest escalation of the supply shock from the September 10 attack on the East-West pipeline. Aramco's workaround does not help Europe: about 60 million barrels sold from its Ras Tanura Gulf terminal for September and October loading — roughly 1 million to 1.5 million barrels a day — are headed to China, South Korea, India and Japan after ship-to-ship transfers near Sohar, Oman. Westbound barrels would have to clear attacked waters in Hormuz and the Red Sea or sail around Africa. The split is showing up in prices: Brent futures eased to about $104 on Friday, but physical Dated Brent topped $130 this week as European refiners like Poland's Orlen scramble for North Sea, US and Kazakh replacements. Aramco is targeting a partial pipeline restart within days and full capacity in six weeks.

Europe's allocation: zero

Saudi Aramco has told its European term customers they will receive no Saudi crude in October, Bloomberg reported Friday. People familiar with the decision said the zero allocation applies to all European term buyers. It is the sharpest escalation yet of the supply shock that began with the September 10 attack on the kingdom's East-West pipeline.

The workaround that leaves Europe out

Aramco has found a way to move some of the stranded crude: about 60 million barrels sold from its Persian Gulf export terminal at Ras Tanura for September and October loading. Those barrels transit the Strait of Hormuz and undergo ship-to-ship transfers near Sohar, Oman, putting roughly 1 million to 1.5 million barrels a day back into the market.

The buyers are in China, South Korea, India and Japan. Not Europe. For Asia, Gulf barrels are a workable fix. For Europe, they are not: westbound cargoes would have to clear Hormuz and the Red Sea, where shipping has come under attack, or spend nearly five weeks sailing around Africa.

What Europe is scrambling for

The East-West pipeline had been moving 4 million to 5 million barrels a day to Yanbu on the Red Sea, bypassing Hormuz entirely. Crude from Yanbu could reach Europe through Egypt's SUMED pipeline to the Sidi Kerir terminal on the Mediterranean. The pipeline attack stopped that flow cold.

Poland's Orlen is already hunting replacements: North Sea grades including Grane, Johan Sverdrup and Johan Castberg, plus offers for US WTI Midland and Kazakh CPC Blend, traders told Reuters. At least four September tanker fixtures from Sidi Kerir to Gdansk have failed. Aramco supplies roughly 40% of the crude Orlen processes.

Prices are splitting in two

The physical market tells the story. Brent futures traded around $104 a barrel on Friday, down from above $108 earlier in the week, as the Gulf workaround eased headline fears. But Dated Brent, the benchmark for physical European crude, topped $130 this week, reflecting what refiners actually pay to replace Saudi barrels.

Aramco is targeting a partial restart of the East-West pipeline within days and full capacity within six weeks, a timeline US Energy Secretary Chris Wright echoed on Tuesday. Until then, Europe's October is a blank, and every week of delay is another replacement-barrel scramble.