The resumption of Saudi Arabia's East-West pipeline, which has a capacity of 7 million barrels per day, after 11 days of stoppage, has created hopes for an improvement in the oil market situation. This pipeline, recognized as a vital route for Saudi oil exports, is currently pumping oil at a limited capacity. However, returning to the previous flow of about 4 million barrels per day may take 6 to 8 weeks.
Rising Transportation Costs and Their Impact on the Oil Market
While global oil prices have decreased towards $100 per barrel, the unprecedented rise in transportation costs and diesel prices still indicates a structural tightness in the oil market. Transportation costs have significantly increased and currently account for about 25 percent of the total cost of oil delivered to Asia, whereas this figure was only 5 to 6 percent in 2025.
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For instance, the French company TotalEnergies has chartered the tanker Kuwait Prosperity at an astonishing rate of $75 million, equivalent to $38 per barrel. Additionally, similar offers this week have risen to nearly $100 million. This situation has led Asian refiners to opt for smaller cargo purchases for long journeys.
Factors Influencing Saudi Arabia's Oil Exports
With the resumption of the East-West pipeline, Saudi Arabia hopes to start oil exports from the Yanbu port. However, returning to the previous flow level will take time due to damage to the pumping stations. While the country seeks to increase its exports, the existing tightness in the oil market and transportation costs may negatively impact this export increase.
Moreover, rising tensions in the Persian Gulf and political factors have also influenced oil prices and may affect Saudi Arabia's decision-making regarding oil exports. Given the increasing risks in the region, tanker owners have reduced their willingness to travel to these areas, which has led to a global shortage of high-capacity vessels.
Meanwhile, Apollo Global Management is evaluating the full or partial sale of Energos's infrastructure, which includes 13 floating LNG vessels, valued at over $3 billion. Additionally, Trafigura has established a dedicated shipping company named Volare, which includes a fleet of 14 VLCC vessels.
Ultimately, despite the existing challenges, Saudi Arabia continues to maintain its position in the global oil market and is striving to improve the market situation by increasing exports and reducing transportation costs.
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