East-West pipeline could still take six to eight weeks to recover to full capacity: Expert

Vessel traffic through the Bab el-Mandeb remains severely depressed at roughly 30 daily transits, versus a normal 70–90, despite the prospect of Saudi Arabia restarting its East-West pipeline. The potential pipeline restart could provide an alternative route for Saudi crude exports, but the continuing disruption to a key maritime chokepoint signals persistent shipping and supply-chain risk for energy markets.

Analysis

A reliable Saudi west-coast export route would reduce the embedded Strait of Hormuz risk premium in physical crude and marginally weaken the bullish tanker tonne-mile impulse created by Middle East routing disruptions. The most exposed public equities are VLCC owners (FRO, DHT, EURN): a greater share of Saudi barrels loadable on the Red Sea side can shorten Europe-bound voyages and reduce demand for incremental vessel days. This is a 1-3 month freight-rate issue rather than a material change to global oil supply, unless it is accompanied by sustained higher Saudi export volumes.

The more durable implication is a bifurcated shipping market. Persistently impaired Red Sea access keeps effective container capacity constrained, supporting freight pricing and charter utilization for owners with fixed-rate contracts (GSL, DAC), while spot-exposed liners face fuel, insurance and schedule-reliability costs that can offset headline rate gains; ZIM remains the weakest equity expression given its higher operating leverage and less protected earnings base. The key non-obvious risk is that a west-coast crude outlet lowers Saudi Arabia's own exposure without restoring confidence for container shipping, leaving tanker and container freight moving in opposite directions.

Consensus may overstate the bearish effect on tankers: if European buyers continue avoiding the southern Red Sea, west-coast loadings may simply replace Gulf loadings rather than eliminate long-haul voyages. The thesis turns decisively negative for VLCCs only if benchmark Middle East-to-Europe voyage durations and spot rates fall together for several weeks; a renewed security incident, higher war-risk premiums, or broader diversion around the Cape would reverse that outcome quickly.

Key Decisions for Investors

• Do not add directional crude exposure solely on this development; monitor Brent time spreads and Saudi official selling prices for Europe. A narrowing backwardation or weaker European OSPs would be the tradable confirmation of reduced chokepoint premium over the next 1-3 months.
• Place FRO/DHT/EURN on a tactical short watchlist, not an immediate short: initiate only if VLCC Middle East-to-Europe spot assessments decline at least 15% from current levels while confirmed west-coast loadings rise. Use a 2-3 month horizon; cover if security-risk premiums or Cape diversions reaccelerate.
• Prefer GSL or DAC over ZIM for residual Red Sea disruption exposure over 6-12 months. Their contracted revenue makes them cleaner beneficiaries of capacity scarcity, whereas ZIM needs spot-rate gains large enough to exceed rerouting, bunker and disruption costs.
• Potential pair: long GSL / short ZIM after the next freight-rate update if Asia-Europe spot rates remain elevated but ZIM does not raise earnings guidance. The catalyst is evidence that higher rates accrue to vessel owners and contract-chartered operators rather than to spot-exposed liner margins; invalidate on a broad normalization of Red Sea transits and declining Asia-Europe rates.