Asian Refiners Seek Saudi Aramco Shipments to Avoid Red Sea Risks
With rising security concerns in the Red Sea, several Asian refiners are hesitant to pick up crude oil shipments from Yanbu, Saudi Arabia. The reluctance stems from difficulties in finding vessels willing to navigate the increasingly perilous waters, especially following recent attacks on tankers and energy infrastructure by Iran-backed Houthi militants.
The situation has escalated as these incidents have heightened risks for shipowners and complicated the broader conflict in the Middle East. Refiners are reportedly seeking alternatives to Saudi Aramco’s request for them to collect crude from Yanbu, which has become a critical hub for Saudi oil shipments.
Yanbu’s Strategic Importance
Yanbu has gained significance for Saudi Arabia as it looks to maintain crude shipments after the war disrupted traffic through the Strait of Hormuz and severely limited supplies from the Persian Gulf. According to a Bloomberg report, at least two Asian refiners have approached Aramco to inquire if they can collect their contracted crude from Sidi Kerir, an Egyptian port on the Mediterranean, instead of Yanbu.
These requests pertain to September cargoes covered by long-term contracts with Aramco. However, the higher costs associated with transporting crude from Sidi Kerir to Asia via a longer route around Africa may lead at least one refiner to forgo its monthly allocation. Some Saudi crude cargoes had already been redirected to Sidi Kerir before Aramco finalized its September sales.
Changes in Shipment Allocations
For the upcoming month, Aramco has instructed refiners in Japan and South Korea to collect their cargoes from Sidi Kerir. In contrast, refiners in China, Taiwan, and India have mostly been asked to take their shipments from Yanbu. Asian refiners typically purchase Saudi crude through long-term contracts negotiated annually, allowing for some flexibility in delivery timing.
The total quantity allocated by Aramco for September remains unclear. However, traders indicated that volumes sold to refiners outside China were generally consistent with those supplied in recent months. Prior to the emergence of security concerns involving the Houthis, Saudi crude destined for Asia was typically loaded at Yanbu and transported through the Bab el-Mandeb Strait at the southern end of the Red Sea.
In a notable shift, many vessels have begun turning off their tracking signals to avoid detection and minimize the risk of attacks. Aramco has also reduced its main crude price for Asian buyers for September, marking the deepest discount since 2020.
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