Wary of risks, Asian refiners want Saudi Aramco’s shipments to be picked outside Red Sea

Yanbu has become increasingly important to Saudi Arabia as it seeks to maintain crude shipments. (Reuters photo)

With ships facing risks, some Asian refiners are unwilling to pick crude oil shipments from Yanbu on the Red Sea. Refiners are reportedly seeking an alternative to Saudi Aramco’s request that they collect crude from Yanbu on the Red Sea, as finding vessels prepared to navigate the increasingly risky waterway has become difficult.The situation has become complicated following a series of attacks on tankers and energy infrastructure in the Red Sea region by Iran-backed Houthi militants.These incidents have increased risks for shipowners while at the same time adding another layer to the wider conflict in the Middle East.

Yanbu, Red Sea, Saudi Arabia & reluctance of Asian refiners

Yanbu has become increasingly important to Saudi Arabia as it seeks to maintain crude shipments after the war disrupted traffic through the Strait of Hormuz and severely restricted supplies from the Persian Gulf.According to a Bloomberg report, at least two Asian refiners have approached Aramco to ask whether their contracted crude can instead be collected from Sidi Kerir, the Egyptian port on the Mediterranean.The requests concern September cargoes covered by long-term contracts with Aramco.However, the higher cost of moving crude from Sidi Kerir to Asia via a route around Africa could lead at least one of the refiners to forgo its monthly allocation, traders told Bloomberg.Some Saudi crude cargoes had already been redirected to Sidi Kerir before Aramco finalised its September sales. For next month’s allocations, Aramco asked refiners in Japan and South Korea to collect their cargoes from the Egyptian port, according to the traders.Refiners in China, Taiwan and India, meanwhile, were mostly asked to take their shipments from Yanbu.Asian refiners purchase Saudi crude through long-term contracts negotiated annually. While these agreements specify the quantity to be taken over the year, buyers have some flexibility over the timing of deliveries. This allows them to reduce or even forgo a particular month’s allocation when circumstances require.The total quantity Aramco has allocated for September remains unclear. However, traders said volumes sold to refiners outside China were generally similar to those supplied in recent months.Before security concerns involving the Houthis emerged, Saudi crude destined for Asia was loaded at Yanbu and generally transported through the narrow Bab el-Mandeb Strait at the southern end of the Red Sea.Two Chinese-owned tankers carrying Saudi crude sailed through Bab el-Mandeb last month with their transponders switched on. Many other vessels, however, have been turning off their tracking signals in an attempt to remain undetected and reduce the risk of attacks.Aramco lowered its main crude price for Asian buyers for September, with the revised pricing representing the deepest discount since 2020. These prices apply to crude loaded at Ras Tanura in the Persian Gulf. Refiners collecting supplies from other locations face higher final costs because of the additional logistics involved in transporting the oil farther out.