The increased maritime risk in the Red Sea and the Bab el-Mandeb Strait is forcing some Asian refineries to reconsider the logistics of receiving Saudi crude oil.
At least two Asian refineries have consulted with Saudi Aramco about the possibility of taking delivery of their September shipments at Sidi Kerir, Egypt, instead of the Saudi port of Yanbu on the Red Sea, according to trade sources cited by Bloomberg.
The change aims to prevent ships from having to pass through Bab el-Mandeb to reach the Red Sea and then head toward Asia. But this alternative comes at a cost.
For certain refineries, sourcing crude oil from the Mediterranean entails a much longer sea route to Asia, which increases fuel consumption, voyage time, freight costs, and potentially insurance premiums.
Oil changes course, not origin
The operation is interesting because it does not necessarily involve a change in the physical origin of the crude oil. The oil continues to come from Saudi Arabia, but the point at which the long-distance maritime leg to Asia begins changes.
The logistics sequence used by Aramco is:
Yanbu → Ain Sukhna → SUMED pipeline → Sidi Kerir → Mediterranean Sea → Atlantic Ocean → southern tip of Africa → Indian Ocean → Asia.
Yanbu is located on the Saudi coast of the Red Sea, while Sidi Kerir is located on Egypt’s Mediterranean coast. To connect the two points, crude oil can be transported from Yanbu to Ain Sukhna, at the southern end of the Suez Canal, and then carried via the SUMED (Suez-Mediterranean Pipeline) system to Sidi Kerir.
This mechanism makes it possible to physically transport crude oil between Egypt’s two coasts without requiring the oil tanker bound for Asia to pass through Bab el-Mandeb.
SUMED becomes a strategic alternative
The SUMED pipeline plays a particularly important role in this scenario because it connects the Red Sea region with the Mediterranean.
Using it allows you to separate two operations that would normally be integrated:
- Transportation of crude oil from Saudi Arabia to Egypt.
- Maritime transportation of crude oil from Egypt to Asia.
The first stage relies on regional land and maritime infrastructure, while the second stage bypasses the Red Sea corridor. The physical distance between Saudi Arabia and Asia is not being eliminated. Instead, the point at which the transfer between logistics systems occurs is being reconfigured.
An oil tanker leaving Sidi Kerir for an Asian refinery must take a considerably longer route around Africa, rather than using the Red Sea and Indian Ocean corridor.
Therefore, the system gains in safety with regard to the risk at Bab el-Mandeb, but loses efficiency in terms of distance.
Maritime risk is factored into the price per barrel
When a refinery receives oil at an alternative delivery point, the effective price per barrel is no longer determined solely by the price of crude oil. The so-called “cost at destination” must be added.
A route change can significantly increase several of these components at the same time. The fuel consumed by an oil tanker increases with the distance traveled. In addition, a longer voyage means the vessel remains tied up with a cargo for a longer period, potentially reducing the availability of tonnage for other contracts.
This could drive up shipping rates even for cargoes that do not pass directly through the risk zone. For this reason, the problem does not affect Saudi Arabia alone. It could end up affecting the entire crude oil shipping market between the Middle East and Asia.
Asian refineries: They don’t respond in the same way
Aramco reportedly asked certain refineries in South Korea and Japan to pick up their September allocations in Sidi Kerir. Meanwhile, most refineries in China, India, and Taiwan were reportedly instructed to continue picking up their allocations in Yanbu.
This means that there is not yet a uniform logistical alternative for all buyers. The reason may be related to contracts, vessel availability, freight structures, risk exposure, and the specific conditions of each buyer.
Another factor has also come to light: according to the sources cited, the Houthis have indicated that they are allowing certain ships linked to China and crewed by Chinese nationals to pass through.
From a commercial standpoint, this means that the same shipping route may carry a different risk cost depending on the vessel’s origin, ownership, or profile.
Source: Oil Price
