Saudi Arabia is looking to significantly increase its oil exports through the Strait of Hormuz. This strategic shift comes after attacks on its East-West pipeline forced a shutdown, removing the primary route that previously allowed Saudi crude to bypass the turbulent Hormuz waterway during the ongoing Iran war. The kingdom had already begun raising shipments via Hormuz in the first 10 days of September, compared to August levels, and is now working to further boost these supplies, according to a source familiar with the confidential plans.
The East-West pipeline, a crucial 1,200 km link, was shut down last week following at least two targeted attacks. This closure jeopardizes millions of barrels per day that were moving through the pipeline, especially as crude prices have been hovering near $110 in London. The pipeline is expected to be out of service for several weeks, according to regional officials cited by the Associated Press, although US Energy Secretary Chris Wright expressed optimism that it would be operational "very soon." Even before the recent attacks, satellite imagery indicated an increase in tankers loading at Saudi export terminals in the Persian Gulf, with an armada of over a dozen Saudi ships waiting near the Strait of Hormuz.
Previously, Saudi Aramco had increased its total exports closer to 4 million barrels per day in early September, with approximately 1 million barrels per day going through Hormuz and the rest via the Red Sea port of Yanbu, the East-West pipeline's terminus. In August, total shipments had fallen to about 3 million barrels per day, the lowest in at least nine years, due to risks posed by Yemen-based Houthi militants. The shift to Hormuz will face challenges, including a dramatic shortage of ships that has pushed freight costs to record highs, with the cost of hauling oil from Persian Gulf ports to China nearing $1 million per day for the first time ever.
Some Saudi oil cargoes to Europe, specifically for September loading, have been canceled due to the pipeline damage, leading major customers like Poland's Orlen to seek alternative supplies. Orlen, which receives about 40% of its oil from Saudi Arabia, has already purchased North Sea grades and is tendering for other international crudes. The supply disruption has supported oil prices, with Brent crude futures trading near $108 a barrel and physical cargo prices in Europe reaching around $122 per barrel. Saudi Arabia aims to compensate for the pipeline shutdown by increasing "dark shipments" through the Strait of Hormuz, a method already employed by the UAE and Iraq, to maintain a substantial export volume despite the ongoing conflict.
