Saudi Aramco is redirecting its crude oil exports to the Red Sea port of Yanbu, following the closure of the Strait of Hormuz due to escalating regional conflict and military strikes by Iran. This move comes as roughly 90% of Hormuz shipments have ceased, stranding numerous vessels and prompting the company to activate alternative transportation routes to maintain international supply.
To circumvent the blockage at Hormuz, Aramco is utilizing its 746-mile East-West Pipeline, which is capable of transferring up to 5 million barrels of oil per day from fields in the east to the western coast. Although this route can handle a significant portion of the kingdom’s usual export volume of approximately 7.2 million barrels per day, it does not fully compensate for the lost capacity through Hormuz. As regional hostilities spread, this pipeline remains a crucial channel to bolster continuity in oil deliveries.
The operational adjustment follows the closure of the Ras Tanura refinery, Aramco’s largest facility, after drone strikes. Market concerns are mounting that full storage facilities could eventually lead to necessary cutbacks in oil production if the export bottleneck persists.
Aramco has started discussions with buyers in Asia and Europe, as well as shipping operators, about the shift to loading at Yanbu. Despite this rerouting, risks remain in the Red Sea, where threats from Yemen’s Houthi group have led some shipping companies to avoid the region. In addition to security concerns, costs for exporters have escalated: war risk insurance has surpassed $1 per barrel, Suez Canal charges have risen, and tanker day-rates are now 20% higher.
Still, rerouting to Yanbu underpins Aramco’s commitment to ensuring the delivery of Arab Light crude to global markets, despite increased challenges and expenses.
