Saudi Aramco Exports Over 60 Million Barrels of Oil to Asia in Sept-Oct, Bypassing Strait of Hormuz and Repairing Pipeline

Source: 井哥观天下

In a move that has captured global energy attention, Saudi Aramco has arranged for the export of over 60 million barrels of crude oil this month and next, with a significant portion destined for Asia. This comes despite the Red Sea shipping route being constrained by Houthi forces and the Strait of Hormuz facing disruptions due to ongoing tensions with Iran. With both major maritime arteries simultaneously obstructed, how is Saudi Arabia managing to maintain its exports?

Traditional Export Routes

Historically, Saudi oil exports relied on two primary channels:

• The East-West Pipeline: Running from oil fields along the Persian Gulf across the entire country to the Red Sea port of Yanbu, this pipeline has a design capacity of up to 7 million barrels per day, with approximately 5 million barrels allocated for export.
• Direct passage through the Strait of Hormuz: Oil was also shipped directly via this strategic waterway.

The Crisis Unfolds

In early September, Houthi forces seized Perim Island, which controls the southern entrance to the Bab el-Mandeb Strait, effectively sealing the Red Sea's southern exit. Shortly thereafter, drone attacks damaged three pumping stations along the East-West Pipeline in the Riyadh and Medina sections, halting loading operations at Yanbu port. Simultaneously, ongoing U.S.-Iran tensions led to prolonged disruptions in the Strait of Hormuz, while daily vessel traffic through the Bab el-Mandeb Strait dropped from approximately 30 ships to just six. Many observers believed Saudi Arabia had run out of options—but the kingdom did not concede.

Saudi Arabia's Strategic Response

Saudi Arabia adopted a clear two-pronged approach: if the main routes were blocked, it would use alternative methods.

Step One: Prioritizing Asian Clients

In mid-September, Saudi Aramco notified European refineries that crude allocations for October would be suspended. While Europe was already grappling with energy shortages, this decision worsened the situation. However, Saudi Arabia's calculus was straightforward: Europe could wait for shipments routed around the Cape of Good Hope, but Asia—its core market—could not be compromised. China is Saudi Arabia's largest crude buyer, with Saudi Aramco holding joint refining ventures in Panjin, Liaoning, and Zhangzhou, Fujian, as well as extensive cooperation with Japan and South Korea. Maintaining Asian clients was not an act of charity but a move to protect commercial interests.

Step Two: "Ant Colony" Transport Method

Saudi Arabia employed a tactic akin to an "ant colony" approach:

1. Small shuttle tankers were assembled to load oil at ports within the Persian Gulf.
2. After nightfall, these vessels turned off their transponders and quietly navigated out of the Strait of Hormuz, hugging the coastlines of the UAE and Oman.
3. Once outside the strait, near Oman's Sohar Port, large oil tankers waiting offshore received the cargo through ship-to-ship transfers.

This method allowed large tankers to avoid entering the Persian Gulf entirely, while smaller vessels—being faster and less conspicuous—operated covertly. According to trade data, each ship-to-ship transfer now takes nearly ten days, compared to the previous five to seven days.

Risk Management and Cost Calculations

Saudi Arabia has been shrewd in managing risk. Traditionally, Persian Gulf oil producers sold crude on a free-on-board (FOB) basis, meaning buyers arranged shipping and bore the risk. Now, Saudi Arabia proactively offers to transport oil out of the strait for Asian clients, absorbing freight costs and risks upfront. The reasoning: Asian refineries have many supply options. If sellers refuse to share risk, buyers would turn to African or Latin American crude. Saudi Arabia is willing to pay higher freight costs to retain its customer base.

Pipeline Repairs Underway

While covert transfers through the Strait of Hormuz continue, Saudi Arabia has not abandoned pipeline repairs. The latest reports indicate that the East-West Pipeline has been restarted, though at reduced capacity, with an initial target of approximately 4 million barrels per day. Analysts estimate full recovery will take about six weeks. Saudi Arabia has also informed Asian clients that loading operations at Yanbu port will resume soon.

However, a telling detail has emerged: Saudi Arabia's promised resumption of shipments from Yanbu will be on a free-on-board (FOB) basis—meaning clients must arrange their own shipping. Saudi vessels operating in the Red Sea would be too conspicuous and risk attracting Houthi attacks.

Impact and Limitations

These measures have helped stabilize international oil prices to some extent. Reports indicate that Japan believes its crude supply through the end of November is largely secured. However, this approach remains a stopgap solution:

• Saudi Arabia has deployed dozens of additional very large crude carriers (VLCCs) in recent weeks, significantly raising transport costs.
• Small tankers navigating the Strait of Hormuz at night still face real risks if detected.
• Transfer capacity at Sohar Port is limited, and increasing congestion is creating new logistical challenges.

Ultimately, Saudi Arabia's true hope lies in the full restoration of the Red Sea pipeline to maximum capacity as soon as possible.