Saudi Crude Exports Hit Wartime High as Hormuz Flows Resume

Summary

• Saudi crude exports reached 5.28 million barrels a day in September, highest since February, Bloomberg tanker data shows.
• Riyadh had shunned Persian Gulf loadings for months until a drone strike disabled its East-West pipeline.
• The shift eased a looming Asian supply crunch, with Brent trading near $103.50-105 a barrel.

The latest

Saudi crude shipments climbed to 5.28 million barrels a day so far in September, the strongest rate since February and the highest since the war with Iran began, according to tanker-tracking data compiled by Bloomberg. The rebound followed a drone strike two weeks ago that crippled a pump station on the kingdom's East-West pipeline, pushing Riyadh back toward the Strait of Hormuz.

Details

• The numbers: Bloomberg tanker-tracking put September exports at 5.28 million barrels a day, sharply above August, when risks to shipping at both the kingdom's eastern and western facilities disrupted loadings. February was the last month that flows ran this high.
• The reversal: For months Riyadh avoided Persian Gulf loadings even as regional neighbors raised shipments, according to Bloomberg. That posture has now flipped, with the kingdom quietly moving more barrels through Hormuz again, a process that accelerated after the pipeline attack.
• The sales: Since the middle of last week the OPEC leader has sold almost 100 million barrels of crude for October and November delivery via Hormuz to Asian buyers, traders told Bloomberg, helping avert a looming supply crunch in the region.
• Satellite evidence: Images compiled by Bloomberg from the European Union's Copernicus browser show the kingdom's main Persian Gulf terminal at its busiest since the war started. Tankers able to carry at least 26 million barrels called there since Sunday, implying average flows above 5 million barrels a day.
• Before the war: Roughly 90% of Saudi crude exports moved through the Persian Gulf before the conflict, Bloomberg reported. That share collapsed to zero in April and May, when Riyadh routed barrels instead to its Red Sea coast.
• The pipeline: The East-West line, with capacity of up to 7 million barrels a day, halted earlier this month after a drone strike disabled one of its pump stations. Work to bypass the facility has since allowed flows to resume, along with shipments from Yanbu, after a stoppage of almost two weeks.
• Mediterranean spillover: The halt to Saudi Red Sea shipments rippled north, where a flotilla of at least 18 oil tankers has gathered off Egypt's Sidi Kerir terminal, at the Mediterranean end of the Sumed pipeline linking the two seas.
• Price reaction: Brent crude rose to $103.50-105 a barrel during the supply disruption, according to Bloomberg. Saudi Aramco declined to comment on the export shift or on the state of repairs at the damaged pump station.

Background

The East-West pipeline is Riyadh's alternative to the Strait of Hormuz, carrying crude across the kingdom to Red Sea export terminals. It became the primary route after the war with Iran made Persian Gulf loadings hazardous, until this month's strike removed that option.

Between the lines

With the Red Sea route disabled and Gulf loadings restored, Saudi export capacity now rests largely on a single waterway again. The 26 million barrels of tanker capacity seen at the Gulf terminal since Sunday, and the near-100 million barrels sold for October and November, indicate Riyadh is treating Hormuz as its working route rather than a temporary fallback.

What's next

Watch whether East-West pipeline flows return to full capacity once the bypassed pump station is repaired, whether the 18-tanker queue off Sidi Kerir clears, and how October loading programs split between Gulf and Red Sea terminals.

Source: Bloomberg