Bloomberg reports; tanker shortage and surging freight rates add further uncertainty

Ships pass through the Strait of Hormuz as seen from Musandam, Oman, in August. [Reuters]
Ships pass through the Strait of Hormuz as seen from Musandam, Oman, in August. [Reuters]

Saudi Arabia is pushing to expand crude oil exports through the Strait of Hormuz after drone strikes knocked out its East-West Pipeline — the key overland route it had relied on to bypass the strait since the outbreak of war with Iran — Bloomberg reported Monday (local time).

Citing anonymous sources familiar with the matter, Bloomberg said Saudi Arabia increased crude shipments through the Strait of Hormuz during the first 10 days of this month compared with last month, and is now seeking to expand exports further.

Saudi Arabia had been routing oil through the East-West Pipeline to circumvent Iran's blockade of the Strait of Hormuz following the outbreak of the US-Iran war. The pipeline was knocked out of operation after at least two sections were hit by drone strikes on Friday (local time).

The Associated Press, citing regional officials, said it could take weeks before the pipeline resumes operation. With its overland bypass route out of commission, Saudi Arabia has little choice but to route exports through the Strait of Hormuz for now.

Based on tanker-tracking data, Bloomberg said total Saudi crude shipments last month averaged about 3 million barrels per day — the lowest level in at least nine years.

According to Bloomberg, Saudi state oil company Aramco had raised total crude exports to around 4 million barrels per day earlier this month, with about 1 million barrels routed through the Strait of Hormuz and the remainder shipped through Yanbu, the Red Sea port at the western terminus of the East-West Pipeline.

Bloomberg said more than 12 Saudi oil tankers have begun waiting outside the Strait of Hormuz in recent weeks, and that the number of tankers loading crude at Saudi Arabia's main Persian Gulf export terminals has also increased in recent days.

However, Bloomberg added that it remains unclear how much and how quickly Saudi Arabia can ramp up exports through the strait.

With Iran's blockade of the Strait of Hormuz continuing, a shortage of tankers passing through the strait and the resulting surge in freight rates add further uncertainty. Bloomberg said the cost of shipping crude from a Saudi port in the Persian Gulf to China nearly hit $1 million per day on Friday (local time) for the first time in history.

The East-West Pipeline stretches 1,200 kilometers across the Arabian Peninsula to the Red Sea and can carry up to 7 million barrels of crude per day.


yckim6452@heraldcorp.com