Saudi Arabia Sells Nearly 100 Million Barrels of Crude Oil to Asian Buyers, Taking on Shipping Risks

Since the middle of last week, Saudi Arabia has sold nearly 100 million barrels of crude oil to Asian buyers, with delivery periods concentrated in October and November. Buyers include refineries in India, Japan, and South Korea. This batch of crude oil will be transported to Asia via the Strait of Hormuz, equivalent to about one day of global oil demand, and the amount of crude oil flowing from Saudi Arabia to Asia through this strait may more than double. Due to rising shipping risks in the Strait of Hormuz and soaring freight costs, more Asian refineries are reluctant to arrange their own tankers to enter high-risk waters. Saudi Aramco is proactively taking on logistics arrangements in the sales process, directly transporting crude oil to Asian customers, thereby transferring some of the shipping, insurance, and navigation risks. Currently, transportation through the Strait of Hormuz has not been completely interrupted; Rystad Energy estimates that approximately 6 to 7 million barrels of crude oil are still transported through the strait daily, with another 2 million barrels exported via pipelines from the UAE. Transportation costs have surged significantly; data from Windward shows that the spot rental rate for very large crude carriers soared to $1 million per day on the 11th of this month, while normal levels are around $30,000 to $50,000. The east-west pipeline connecting Saudi Arabia's eastern oil fields to the Red Sea port of Yanbu is gradually being restored, but has not yet fully resumed operations. Saudi Aramco hopes to achieve a meaningful recovery by this Saturday. Transportation routes and logistics costs are becoming important factors affecting the actual supply of Middle Eastern crude oil and the landed prices for Asian refineries.

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