Saudi Arabia Sells Nearly 100 Million Barrels to Asian Buyers

Saudi Arabia has sold nearly 100 million barrels of crude for delivery to Asian buyers in October and November, shifting more shipping and insurance risk to Saudi Aramco as regional transport costs rise.

Refineries in India, Japan and South Korea are among the customers. The cargoes will continue moving through the Strait of Hormuz toward Asia, representing roughly one day of global oil demand. Saudi crude flows through the strait could more than double in the near term.

Asian refiners are increasingly reluctant to arrange their own tankers into high-risk waters because of rising shipping risks and freight costs. Saudi Aramco is instead handling the logistics and delivering crude directly to customers, transferring part of the vessel, insurance and voyage risk from buyers to the seller.

Shipping through the Strait of Hormuz has not been completely disrupted. About 6 million to 7 million barrels of crude continue to move daily through the strait’s southern route, while about 2 million barrels are exported through United Arab Emirates pipelines.

Transport costs have nevertheless surged. Very large crude carrier spot rates reached $1 million a day on Sept. 11, compared with a normal range of $30,000 to $50,000.

Saudi Arabia’s East-West pipeline, which connects eastern oil fields with the Red Sea port of Yanbu, is gradually recovering but has not fully resumed operations.

With diversion capacity among Hormuz shipping, Red Sea exports and the East-West pipeline not yet fully restored, transport routes and logistics costs are becoming important factors in Middle Eastern crude availability and the landed prices paid by Asian refineries.

The pipeline’s recovery could support exports through Yanbu, a route that bypasses the Strait of Hormuz. Earlier expectations for additional Saudi crude exports were tied to progress on the pipeline restart.