Oil: Red Sea bottlenecks alter Saudi export risk landscape – TD Securities

Impact of Strait Disruptions on Saudi Oil Exports

Ryan McKay, Senior Commodity Strategist at TD Securities, examines how recent disturbances near the Strait of Hormuz and Bab El-Mandeb are altering the risks associated with Saudi crude exports and the available bypass routes. These changes are influencing the overall tightness of global oil supply. The analysis covers export flows through Yanbu, the use of Very Large Crude Carriers (VLCCs), limitations of the Suez Canal and SUMED pipeline, and the vulnerability of Saudi oil shipments to Houthi attacks.

Saudi Export Routes and Threats from Houthi Activity

Currently, the movement of up to 16-17 million barrels per day (b/d) of crude through the Strait of Hormuz has been interrupted. Out of these, approximately 7 million b/d can circumvent the Strait. Saudi Arabia has around 5-5.5 million b/d of spare capacity compared to pre-conflict levels, which can be transported via the East-West pipeline to the Red Sea for export.

The East-West pipeline appears to be operating at maximum capacity, with Yanbu ports scheduled to load 13 million b/d of crude for export this week and over 5 million b/d next week.

Based on current export schedules, an estimated 70-75% of Yanbu shipments may be at risk if Houthi disruptions occur in the Red Sea. Of these exports, 90% are planned to be loaded onto VLCCs, and at least 80% are destined for Asian markets or the Saudi Jazan refinery further south along the coast. Fully loaded VLCCs are unable to pass through the Suez Canal, meaning these shipments must travel through the Bab el-Mandeb Strait.

Between 2-2.5 million b/d of scheduled VLCC exports could potentially avoid Houthi threats by heading north. With Egypt recently increasing its imports of Saudi crude, it is expected that up to 2-2.5 million b/d of VLCC loadings may be directed to the port of Ain Sukhna. From there, oil is transported via the SUMED pipeline, which has a capacity of 2.5-2.8 million b/d, to the Sidi Kerir terminal on the Mediterranean Sea for further export. This route largely avoids Houthi risks, but the maximum capacity for this option is just over 2 million b/d.

This article was produced with assistance from an AI tool and reviewed by an editor.