Saudi Arabia has significantly raised the war insurance costs for its tankers in response to threats in the Red Sea. According to new reports, the premiums for tankers associated with Saudi Arabia heading to the port of Yanbu have reached nearly 3% of the ship's value, while this figure was less than 1% in early July.
Impact on Export Costs
In the southern ports of Saudi Arabia, including Jizan, premiums can reach 7%. In comparison, shipping from the Strait of Hormuz incurs costs between 6% and 9%. This increase in costs means adding millions of dollars to each oil shipment. For example, a trip from Yanbu could incur around $3 million in war insurance. Additionally, insurance costs for southern ports or the Strait of Hormuz can reach $7 million, while this figure was at least $100,000 before the war.
Read more: The White House Rejects U.S. Diesel Export Ban
New Restrictions and Changes in Export Routes
Saudi Arabia has spent billions of dollars to build the East-West pipeline to reduce dependence on the Strait of Hormuz and transport oil to Yanbu. This pipeline used to transport an average of 4 million barrels of oil per day across the country to Yanbu. However, recent drone attacks have led to the shutdown of this pipeline, and Aramco is operating at lower rates after its reopening. Nevertheless, loading of crude oil from Yanbu has not resumed as of Thursday, despite earlier reports of plans to load.
This disruption has caused Saudi Arabia to revert back to the Gulf. Aramco has sold about 60 million barrels of oil for loading in September and October from the port of Ras Tanura, and oil transported through the Strait of Hormuz is used for ship-to-ship transfers near Sohar. Asian buyers have purchased a significant portion of this oil, and some European customers have been informed that they will not receive Saudi crude oil in October.
The Red Sea route also has its specific challenges, as the Houthis have threatened to attack Saudi-related ships around Bab el-Mandeb. Shipping companies feel the practical difference between the two straits. In recent months, U.S. forces have provided limited air support around the Strait of Hormuz, but there is no similar support in the Red Sea. Currently, Saudi Arabia has two export routes, both facing similar issues: expensive ships, high insurance costs, and increased uncertainty regarding the transfer of oil to the final destination.
Read more: Qatar Increases Traffic of Liquefied Gas Tankers from the Strait of Hormuz · Iran War Changed the Oil Route in the Persian Gulf
