Saudi Oil Reroutes Hit Capacity and Security Limits
When Iran shut down the Strait of Hormuz, Saudi Arabia quickly redirected its oil flows to the Red Sea. Now, that route has become dangerous because of the Houthi blockade, so Saudi is rerouting to Egypt—and two LNG tankers in the Egyptian port of Damietta just got struck by drones. OPEC‘s number-one is running out of options to reroute its oil exports.
In early March, after Iran effectively paralyzed vessel traffic via the world’s biggest oil chokepoint, every Gulf state that could redirect export flows did so. In the case of Saudi Arabia, it shifted its onshore Arab Light volumes from the Persian Gulf in the east onto the 7 million barrels per day Petroline to the port of Yanbu on its western shores. This quickly pushed Yanbu’s oil exports to about 2.47 million bpd, a massive 330% surge compared with pre-war levels, according to Windward data.
Saudi Oil Flows Rebound and Then Decline
By April, Saudi Arabia was shipping over 4 million barrels daily from Yanbu, demonstrating the benefits of alternative routes for oil and oil products. Later, however, Saudi oil flows from the southern Red Sea port declined. By June, Yanbu loadings had fallen to around 2.39 million barrels daily, down by 41% from the March peak and a 66% slump from the total Saudi export level from January of about 7.96 million barrels daily across both Gulf and Red Sea terminals, Wood Mackenzie said earlier this month.
Suez Canal and SUMED Pipeline Become Critical Route
The decline, on the one hand, may have been the result of the temporary Hormuz traffic resumption in late June, after Iran and the United States managed to agree a ceasefire deal. But then that deal fell through, missile strikes resumed, and Hormuz shut down again. According to the latest data from Windward, a total of five tankers went into the strait on July 29 and three exited the chokepoint. This is a fraction of pre-war traffic levels.
Meanwhile, the maritime intelligence firm also reported crude loadings in progress at Yanbu—in dark mode. There were 12 vessels at the port, including oil tankers and cargo carriers, and there were separately two “active ship-to-ship transfer pairs”. From Yanbu, Saudi vessels now sail north instead of South to avoid the Houthi blockade, which the Yemeni group declared on Saudi vessels last week.
This leaves Saudi Arabia with one maritime route out of the Middle East: the Suez Canal and the SUMED pipeline to Egypt’s Mediterranean coast. The SUMED pipeline has a capacity of 2.5 million barrels daily, which suggests it would be physically impossible for Saudi Arabia to shift all of its oil flows previously handled by the East-West pipeline and Yanbu to that conduit. Yet it could, reportedly, reroute half of them to SUMED, according to Windward.
Original Article: Saudi Oil Reroutes Hit Capacity and Security Limits — Yahoo