Saudi Aramco to Ship 60m Barrels of Gulf Crude Via Oman as Hormuz Disruptions...

Saudi Arabia has sold about 60 million barrels of crude from its Ras Tanura export terminal inside the Strait of Hormuz for loading through ship-to-ship transfers at Oman's Sohar port this month and next, according to multiple trade sources cited by Reuters, providing Asian refiners with an alternative route for securing Saudi oil amid disruptions to the kingdom's normal export flows.

The shipments indicate that Saudi Aramco is maintaining a significant flow of crude from its Gulf terminals despite the disruption to exports from its Red Sea port of Yanbu following an attack on the East-West pipeline.

Aramco's Gulf exports have recovered to an average of about 1 million to 1.5 million barrels per day, according to the sources. That is broadly in line with, or slightly above, August levels and has helped ease pressure in global oil markets by replacing some of the barrels affected by the slowdown at Yanbu.

Chinese and South Korean refiners are among the largest buyers of the spot cargoes, while additional supplies are heading to India and Japan, the sources said.

The increased availability of Saudi crude contributed to a decline in oil prices on Friday, with global futures falling by more than $1 a barrel. Traders were also responding to reports that Saudi Arabia could restore about half of the East-West pipeline's capacity within days and was offering additional crude cargoes to Asian refiners through ship-to-ship transfers near Sohar.

The developments point to a rapid adjustment in the physical oil market as producers, refiners and shipping companies seek alternative ways to move crude around infrastructure and security constraints.

Sohar Becomes An Important Transfer Point

Sohar, outside the Strait of Hormuz, has emerged as an important point for transferring Saudi crude from larger Gulf shipments onto vessels bound for Asian customers.

The arrangement allows Saudi oil to continue reaching major Asian markets even as the disruption to the kingdom's pipeline infrastructure changes the normal balance between its Red Sea and Gulf export routes.

Asia is the main market for Saudi crude, making the additional Gulf supplies crucial for refiners in China, South Korea, India and Japan. Japan's refiners, in particular, say they have been able to maintain adequate supplies through November because of the alternative shipping arrangements.

The Petroleum Association of Japan said Friday that the country's oil refiners had secured sufficient crude supplies through November, pointing to ship-to-ship transfers taking place outside the Gulf.

"In some cases, oil passes through the Strait of Hormuz at Saudi Arabia's risk before being transferred to us outside the Gulf. For that reason, supplies from Saudi Arabia have not ceased entirely," PAJ President Shunichi Kito said in Tokyo.

The comments reveal the logistical complexity of maintaining Saudi crude flows under current conditions. Oil can still leave Ras Tanura, but the route to Asian refiners involves additional transfers and exposure to risks around the Strait of Hormuz.

Higher shipping costs add to the disruption

The alternative supply routes are helping prevent a larger loss of Saudi crude from the Asian market, but they are also increasing transportation costs.

Supertanker freight rates reached record levels this week as demand for alternative crude routes increased. The rate to charter a very large crude carrier capable of carrying about 2 million barrels from Fujairah to Asia in early October reached 800 Worldscale, according to a shipbroking firm.

Higher freight costs could become an important part of the oil-market equation if the alternative shipping arrangements continue for an extended period. Even where crude remains physically available, more expensive and complicated transportation can raise the delivered cost for refiners.

The immediate market response, however, has focused on the additional Saudi barrels reaching Asia and the prospect of restoring part of the East-West pipeline's capacity.

The reported 60 million barrels of crude scheduled for ship-to-ship loading in September and October represent a substantial flow of oil into a market that has been concerned about supply disruptions. Combined with the potential restoration of the pipeline, the additional shipments have reduced some of the immediate supply concerns that had pushed oil prices higher.

But the situation remains dependent on the security of Saudi export infrastructure and shipping routes. For Asian refiners, the ability to receive Saudi crude through Sohar provides an alternative channel, but the arrangement also demonstrates how disruptions to one part of the world's oil infrastructure can quickly alter shipping patterns, freight costs and the pricing of crude across the region.