Saudi Aramco Shuts 400,000-Bpd Refinery After Houthi Strike

Saudi Aramco shut its 400,000-barrel-per-day Jazan refinery on July 27 after a Houthi attack damaged the facility, according to an IIR note seen by Reuters.

IIR said the strike damaged the refinery’s Integrated Gasification Combined Cycle complex and tank farm. Repairs are tentatively expected to be completed by August 15.

Tentatively is doing some fairly heroic work there.

The attack took place Saturday, and video verified by Reuters showed a large plume of smoke rising from the refinery. Houthi military spokesman Yahya Saree said the group also struck Aramco facilities in Yanbu. Saudi Aramco has not commented on the damage or restart schedule.

A shutdown lasting less than three weeks may not sound catastrophic. But Jazan is not going offline in a normal fuel market. Gasoline, diesel, and jet fuel supplies were already tight, inventories were already thin, and refining margins had already surged to record highs.

Crude oil has proved remarkably movable during the Gulf war. It can be rerouted, stored on tankers, discounted, or sent through another port. Finished fuel is less flexible. It must first pass through a refinery that is actually operating.

Jazan removes 400,000 bpd of that capacity, at least for now.

And then there is Yanbu. Saudi Arabia has leaned heavily on the Red Sea port to move crude around the Strait of Hormuz. That workaround helped keep oil moving while the Gulf route was disrupted. A Houthi strike on Yanbu suggests the war may now be following the workaround west.

Russia offered one bit of good news Sunday, saying several refineries had restarted and its fuel crisis was easing. Still, Moscow’s diesel export ban remains in place, Ukrainian attacks continue, and some Russian regions remain short of fuel.

So yes, refining capacity is returning in Russia. Now 400,000 bpd has disappeared in Saudi Arabia.

The crude market has spent months finding detours. The fuel market has fewer of them. You cannot reroute your way around a refinery that is not running.

Source: oilprice