Iraq, as a leader in diversifying MEG trade patterns, has turned to direct voyages and Malaysian lightering for long routes. Meanwhile, Saudi Arabia emphasizes direct voyages by relying on its national fleet. The lack of use of local hubs has increased turnaround times and transportation rates across the region.
Developments in Trade Patterns in the Gulf Region
In the initial phase following the collapse of the MoU agreement, crude oil loading from MEG was heavily dependent on shuttle trades in the Gulf. This dependency helped reduce the number of owners exposed to challenging navigation conditions in the Strait of Hormuz. According to the latest statistics, the specific fleet has reached 63 VLCCs (Very Large Crude Carriers), indicating a loading capacity of approximately 7.6 million barrels per day (Mbd) per month.
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Impact of Diversifying Trade Patterns
With the continued growth of MEG loadings and Saudi Arabia's shift in export routes to the east, the diversification of trade patterns in this region has become an inevitable reality. In recent months, about 0.7 million barrels (30%) of the loads loaded after the MoU agreement in July have been loaded without using STS in the Gulf. This figure increased to over 1.0 million barrels (27%) in August and to 0.5 million barrels (43%) in September.
Iraq, as the frontrunner in this trend, has loaded a significant portion of the cargoes to avoid STS operations in the Gulf in July and August. A closer analysis of Iraqi trades indicates a preference for direct loadings, especially towards India (West Coast). Meanwhile, for eastbound Malacca voyages, a significant portion of the cargoes is loaded in Malaysian waters.
Furthermore, an analysis of the trade patterns of other regional producers shows that Saudi Arabian cargoes are increasingly taking a larger share of the loads. Here, direct voyages are even predominant in long-haul cargoes. Despite limited STS activities in WCI and Malaysia, trade patterns are changing.
As MEG loadings continue to expand and STS capacity in the Gulf remains limited, the dominance of shuttle trades is gradually being challenged. Long-haul voyages mean an increase in the number of vessels required for navigation in the challenging waters of the Strait of Hormuz. This increase also leads to rising realities regarding transportation rates. At the same time, the periodic return of regional tensions could lead to sudden spikes in transportation rates.
In this context, the impact of higher loadings from Yanbu, while the East-West pipeline gradually continues its operations, depends on changes resulting from regional flows. If higher loadings from Yanbu are accompanied by a reduction in MEG loadings, the cargoes may shift towards lower-risk areas, thereby reducing the risk realities in transportation rates. Conversely, if the producer maintains or increases loadings at both export points, additional Yanbu cargoes will require more demand and increase risks, leading to further support for transportation rates.
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