Trade industry sources said on Tuesday that Saudi Aramco, the national oil company of Saudi Arabia, has resumed loading tankers with product at its Juaymah and Ras Tanura oil terminals, which lie within the contested waters of the Strait of Hormuz.
The move suggests Aramco believes it will be able to ship its products through the Strait of Hormuz, either in coordination with Iran, or in defiance of Iran’s terrorist threats. The Saudis might even see Hormuz as safer than the alternative route through the Red Sea they have been using, as Iran’s regional proxy, the Houthi insurgents of Yemen, have “banned” Saudi Arabia from using another vital shipping chokepoint, the Bab el-Mandeb Strait.
Emma Li, a market analyst with Vortexa, told Reuters on Tuesday that the Saudis might have concluded they have no choice but to dare the Strait of Hormuz again because their only other gambit to ship oil to Asia was a lengthy route through the Mediterranean and Aramco’s Asian customers are “not happy with the long voyages and high freight cost.”
According to ship tracking services, three Saudi supertankers loaded two million barrels of crude oil apiece from Juaymah and Ras Tanura over the past week – the first time in three weeks that either port has loaded an oil cargo.
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Six more Very Large Crude Carriers (VLCCs) are in position to load from the ports in the near future and all of the massive ships would need to pass through the Strait of Hormuz to deliver their cargoes to Asian customers, predominantly China.
Aramco made a public offer of crude oil cargoes to Asian buyers on Monday, proposing to deliver the oil via ship-to-ship transfers off Fujairah, a port city in the United Arab Emirates (UAE) that lies on the Gulf of Oman side of the Strait of Hormuz. The offer included heavy grades of crude oil, which can be refined into high-quality fuels.
Bloomberg News cited industry sources who said some of the details of the proposed oil sales are being kept under wraps for security reasons. Most of the prospective buyers are Chinese refiners who are hungry for the heavier grades of Saudi crude and Aramco might be planning to sail its tankers “dark” through the Strait of Hormuz to avoid Iranian attack.
Other sources in the oil markets said Saudi Arabia has somehow already transferred a great deal of its heavy crude to the UAE, and is ready to hand the product off to buyers through ship-to-ship transfers near Fujairah immediately.
Over the long term, the Saudis, Emiratis, and other oil powers are still working to develop alternative routes that could not be threatened by Iran or its terrorist proxies, so the Strait of Hormuz could become much less valuable over the next few years.
U.S. Energy Secretary Chris Wright said last week that “almost 9 million barrels per day” are still flowing through the Strait of Hormuz despite Iran’s threats, added to between 5 and 7 million barrels “leaving the region via newly upgraded pipelines and export facilities.”
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