Saudi Aramco Halts October Crude to Europe as Gulf Loadings Rebound and LNG Tightens

Saudi Aramco has informed European term customers that they will receive no Saudi crude cargoes in October, a sharp reversal for refiners that had been relying on the kingdom's medium and heavy grades. The cut comes even as Saudi Arabia has sold as many as 60 million barrels from the Ras Tanura terminal for September and October loading, according to OilPrice.com reporting, which suggests Riyadh is redirecting barrels rather than losing them outright. French President Emmanuel Macron has responded by calling the G7 back to the table to discuss another coordinated release of emergency oil stocks as Europe loses Saudi supply and diesel prices climb.

The disruption is rooted in damage to pumping stations on the Saudi East-West pipeline, which remains offline with no firm repair timetable, and in persistently thin tanker traffic through the Strait of Hormuz. LNG has been hit even harder: at least two LNG carriers transited Hormuz this week while others resorted to ship-to-ship transfers outside the strait. OilPrice.com reported that European and Asian LNG prices still have room to rise by roughly a third given low European gas inventories and fierce competition for spot cargoes, with Qatar and UAE volumes still fighting a supply crunch.

Crude benchmarks, however, have stopped climbing for now. Oil prices were heading for a weekly loss after three consecutive weekly gains as traders' fears about Saudi Arabia's export capacity eased, with Brent settling lower mid-week after touching multi-month highs. Refining margins remain the most stressed part of the chain: Kpler has argued that six and a half months of Middle East supply losses are now working their way into gasoline and diesel prices, and China's August refined fuel exports of 6.01 million tons, up 12.7% year on year, have not been enough to close the gap.

Coal is tightening at the margin as well. China's government has called on domestic coal miners to hold production steady after a jump in thermal coal spot prices earlier in September, a sign that power generators are substituting away from expensive imported gas and oil. For industrial buyers, the combined picture is one of adequate headline crude supply but persistent tightness in the products, LNG and thermal coal segments where the physical disruption actually bites.