Asian refiners look to Suez Canal to move Saudi oil amid Houthi shipping threats

HOUSTON - Asian refiners are seeking to ship crude oil from Saudi Arabia’s Red Sea port through the Suez Canal and around Africa after Yemen’s Iran-aligned Houthis said they would impose a naval blockade on Saudi Arabia.

The move marks the latest redirection of oil flows due to the US-Israeli war with Iran that has sharply cut supplies, pushing refiners to seek alternative barrels or undertake different routes.

Two oil tankers carrying Saudi crude to Asia reversed course in the Red Sea on July 21 after threats from the Houthis, while vessel crossings via the Strait of Hormuz dropped further at the start of the week.

Shipping west towards Egypt from Saudi Arabia’s Red Sea port of Yanbu, and passing through the Suez Canal and rounding the Cape of Good Hope in Africa, will require as much as four additional weeks and raise freight and fuel costs, analysts and industry experts have warned, compared to the typical route of heading east from Yanbu to the Arabian Sea.

Vessel takes long path to India

Liberia-flagged vessel Rodos, which loaded crude oil at Yanbu and headed to India’s west coast, was pointing west and signalling the Suez Canal, ship-tracking data via LSEG and Kpler showed on July 21.

South Korean refiner Hyundai Oilbank was seeking a Very Large Crude Carrier (VLCC) on July 21 to load oil at Yanbu with the option of using the Suez Canal and Egypt’s SUMED pipeline, which links the Red Sea and Mediterranean Sea, to head to South Korea, according to a shipping source.

A fully loaded VLCC cannot traverse the Suez Canal due to its draft limit and shippers often lighten the vessel’s load on the Red Sea side before entering the canal by moving a portion of the oil on Egypt’s SUMED pipeline. The ship picks up the oil on the Mediterranean side after it passes the Suez Canal with a lighter load.

Charterers could use the SUMED pipeline and Suez Canal at their discretion, or if the Bab el-Mandeb Strait, the southern gateway to the Red Sea, is fully blocked, the shipping source said. The parties would calculate the cost of the deviation later.

The Suez Canal and SUMED pipeline are commonly used for shipments from the Red Sea to Europe.

“Changing behaviour by tankers tells us that they are taking the threats seriously,” said Matt Smith, commodity research director at Kpler.

He added that the Houthis’ disruption comes at a difficult time for Saudi Arabia as its crude and products transiting Bab el-Mandeb climbed to a record in June at over four million barrels a day. REUTERS