Saudi Arabia has maximized its capacity to transfer crude oil via ship-to-ship due to Houthi attacks, redirecting its oil flow towards the Gulf of Oman. This change has led to a sharp increase in transportation costs, pushing the daily transportation rate to a record $1.27 million.
Impact of the route change on the oil market
According to reports, Saudi Arabia has sold about 60 million barrels of crude oil for shipment from the Gulf of Oman as part of this month's and October's cargoes. This move has put additional pressure on the Very Large Crude Carrier (VLCC) market, tightening an already strained market. As a result, the transportation rate reached $1.27 million on Monday, the highest recorded to date.
Read more: Petrobras signs cooperation agreement with Mozambique National Hydrocarbons Company
Details of crude oil transportation
The oil transfer route via ship-to-ship involves loading crude oil at the shores of the Persian Gulf, transferring it towards the Strait of Hormuz, and then transferring the cargo to a larger tanker in the Gulf of Oman. In September, the average volume of oil transferred reached 3.6 million barrels per day, showing a significant increase from 900,000 barrels per day in August, prior to the Houthi attacks on the East-West pipeline.
According to analysts, this amount of crude oil requires an additional 36 to 40 large oil tankers. Furthermore, Anup Singh, Global Head of Research at Oil Brokerage, stated that the increase of 2 million barrels per day in Saudi oil flows will create additional demand for 15 large oil tankers to conduct shuttle operations.
Additionally, 20 tankers are waiting in the Red Sea for operations to resume at the port of Yanbu, complicating the tanker supply situation. Given these constraints on tanker supply, the daily transportation rate for large oil tankers has reached a record $1.27 million on Monday.
Read more: Oil prices rise due to global supply shortage · Sufficient crude oil supply for Japanese refiners until the end of November
