In the face of escalating regional conflicts, Saudi Arabia is adapting its oil export strategies to ensure continuous supply to global markets. The kingdom has turned to alternative routes, particularly through the Mediterranean Sea, to circumvent disruptions in the Red Sea and Strait of Hormuz. This shift comes as the conflict between the U.S. and Iran enters its sixth month, compounding the challenges for oil shipments.
The recent Houthi attacks on Saudi oil tankers in the Red Sea have forced the kingdom to seek new avenues for its crude oil exports. The Mediterranean Sea, specifically the Egyptian port of Sidi Kerir, has emerged as a critical alternative. This route, however, adds significant time and cost to the transportation process, impacting the
Navigating the Mediterranean Route
The journey from Sidi Kerir through the Mediterranean Sea, around Africa’s Cape of Good Hope, and out to Asia adds 20 to 30 days to voyages. This extended route has led to a surge in charter rates for Very Large Crude Carriers (VLCCs), which have at times tripled from about $100,000 a day in peacetime. The increased costs and longer transit times highlight the complexities of navigating global conflicts.
Egypt’s SUMED pipeline plays a crucial role in this new strategy, transporting oil from a Red Sea port to Sidi Kerir. Last week, loadings at Sidi Kerir climbed to 1.3 million barrels per day a 17-week high. Meanwhile, crude exports from the Red Sea port of Yanbu dipped to a 19-week low of just under 3 million barrels per day.
The Impact of Houthi Attacks
The Houthi attacks on Saudi oil tankers have significantly disrupted the Red Sea route, which has been a major export alternative to bypass shipping through the Strait of Hormuz. The threat to this route puts at risk millions of barrels of Saudi oil that have been reaching markets despite the ongoing conflict. While the Mediterranean route offers a lifeline, it cannot fully replace the Red Sea exports.
Some activity out of the Red Sea port continues, with reports indicating that the Houthis gave safe passage to at least four Chinese oil tankers carrying Saudi oil through the Bab al-Mandeb Strait. This selective enforcement adds another layer of complexity to the already challenging situation.
Market Reactions and Future Prospects
Oil futures prices have fluctuated in response to these developments. Prices topped $100 last week after the Houthi attacks but fell further as investors hoped for deals that could prompt a return of Strait of Hormuz shipping. President Donald Trump mentioned that the U.S. is holding deep talks with Iran although Iranian authorities denied this. Additionally, Iran and Oman are reportedly trying to reach an agreement to resume transits through the strait.
The maritime-data company Windward reported that no oil tankers crossed the Strait of Hormuz on Monday in either direction. This halt in traffic underscores the severe impact of the conflict on global oil supplies. Analysts at Goldman Sachs estimated that Persian Gulf oil flows had edged down to 41% of pre-war levels.
As Saudi Arabia continues to adapt to these challenges, the global oil market remains on edge, watching closely for any developments that could alleviate the current disruptions.
