Saudi Arabia Forced to Change "Crude Oil Export Route" Again as Red Sea Ports Threatened by Houthi Forces

The persistent threat posed by the Houthi armed group to Red Sea shipping is forcing Saudi Arabia to once again restructure its global crude oil export system, further complicating the already intricate global energy supply chain.

According to CCTV International News, the Yemeni Houthi armed group stated in a declaration on August 5 that since announcing a maritime shipping ban on Saudi Arabia on July 22, the group has cumulatively attacked 8 Saudi oil tankers, while another 29 Saudi tankers have been forced to alter their routes or return. The statement also noted that as the Houthis strengthened their maritime blockade of the Bab el-Mandeb Strait, Saudi Arabia began redirecting tanker routes to the northern Red Sea.

Since the blockade of the Strait of Hormuz, Saudi Arabia's Yanbu port on the west coast has been a critical alternative channel for global crude oil supply. However, according to Bloomberg, after the Houthis announced the blockade of Saudi ports in July, the security situation at Yanbu port deteriorated rapidly and a large number of oil tankers began bypassing Africa or heading north through the Suez Canal, with journeys of up to more than 17,000 miles—well over double the usual routes. At the same time, Saudi Arabia has begun offering some buyers the option to pick up shipments in the Gulf of Oman—outside the Strait of Hormuz—and loading activity on the Persian Gulf side has also visibly accelerated.

This series of adjustments has greatly increased the cost of crude oil deliveries and triggered a chain reaction among Asian buyers: at least one East Asian refiner is considering giving up next month's Saudi crude delivery due to additional costs, while several Asian refiners have declined Saudi Aramco's requests to pick up from Yanbu, instead requesting loading at the Sidi Kerir port in the Mediterranean Sea, Egypt. In contrast, European refiners have unexpectedly benefited, with several companies securing their full Saudi crude allocations for September.

Houthi Threats Spread, Yanbu Port in Trouble

At the heart of the current logistics crisis is the persistent threat posed by the Houthis to the Bab el-Mandeb Strait—the narrow southern exit of the Red Sea.

Reports state that since announcing the blockade of Saudi ports in July, oil tankers that previously loaded at Yanbu have been rerouted north through the Suez Canal to the Mediterranean port of Sidi Kerir, Egypt, before continuing on to Asia or other destinations. For vessels bound for Asia, this means having to circumnavigate Africa entirely, making a journey of over 17,000 miles—more than double the normal route.

However, this alternative route has significant bottlenecks of its own. The Suez Canal lacks sufficient depth for fully-loaded Very Large Crude Carriers (VLCCs); while the Sumed Pipeline across Egypt provides a supplement, its capacity cannot shoulder all of the Saudi crude normally required by the Asian market, resulting in a double logistical constraint.

According to Bloomberg ship tracking data, over the past month, vessels operated by Korea's Sinokor Group, Greece's Dynacom Tankers Management Ltd., and Norway's DHT Management AS have frequently shuttled crude between Yanbu and Ain Sukhna, the southern entrance of the Sumed Pipeline. In addition, at the end of the month, six empty Saudi VLCCs bypassed Bab el-Mandeb and sailed via the west coast of Africa, heading towards the western entrance of the Mediterranean.

Persian Gulf Activity Accelerates; Gulf of Oman Becomes New Delivery Point

As the western route is obstructed, Saudi Arabia is quietly activating another contingency plan—transferring some crude oil delivery points to the Gulf of Oman, i.e., outside the Strait of Hormuz.

Satellite images and ship-tracking data show that a large number of Saudi oil tankers are gathering in the Gulf of Oman, and loading operations at Saudi ports on the Persian Gulf side have also increased significantly. This indicates that Saudi Arabia may be arranging for crude to depart from Persian Gulf ports, to be transshipped via the straits near Oman or the UAE and delivered at sea.

This model has previously become a vital lifeline for the UAE and some other Gulf oil-producing countries, with Sinokor of Korea once again playing a key role. According to Bloomberg data, since August 11, three of the four VLCCs that shipped about 8 million barrels of crude from Saudi Persian Gulf ports belonged to Sinokor.

Asian Buyers Under Pressure, European Refiners Unexpectedly Benefit

The rising costs resulting from the logistics reshuffle are causing clear divergence among Asian buyers.

Reports indicate, according to traders, that for key Asian markets, Saudi Arabia's overall crude oil allocations remain well below prewar levels with Iran, and total Saudi exports continue to lag those before the war. Soaring shipping costs are prompting some buyers to reevaluate purchase plans—at least one East Asian refiner is considering giving up next month's Saudi crude delivery due to the extra expenditure.

However, considerations of energy security have, to a certain extent, outweighed concerns over cost. According to traders, Japanese and Korean refiners have essentially decided to pick up Saudi crude at Sidi Kerir next month, with energy security taking precedence over cost pressures.

In contrast to the difficulties faced by Asian buyers, European refiners have unexpectedly gained an edge in this round of logistical restructuring. Over the past week, several European refiners have received full Saudi crude allocations for September, dispelling earlier concerns caused by about a week's delay in the supply nomination process.