Freight rates for tankers to ship Saudi crude from the Yanbu port on the Red Sea to Asia have slumped from the highs seen earlier this month, as more vessels are diverting to the Saudi export port that bypasses the Strait of Hormuz.
Tanker rates on the Yanbu-Asia route have slumped from a high of over $450,000 per day in early March to about $200,000 per day for voyage agreed this week on a 2011-built very large crude carrier (VLCC), according to sources familiar with the deals and brokerage reports cited by Bloomberg.
With the Persian Gulf-Asia route effectively closed for most crude, especially the one from Saudi Arabia, the Yanbu port has become the go-to place for tankers to remain busy in the trade to ship crude from the Middle East to its key export region, Asia.
Saudi Arabia is accelerating the shift from Strait of Hormuz to the Red Sea as commercial traffic through the strait remains near-collapse levels.
“Iran continues to enforce a controlled transit model through Hormuz, enabling selective passage via IRGC-managed corridors based on cargo type and destination,” maritime intelligence firm Windward said in a note on Monday.
With the Strait of Hormuz open only on the discretion of the Islamic Revolutionary Guard Corps (IRGC), Saudi Arabia is shifting as much of its crude exports as it can to the Red Sea route.
In the week March 15 through 21, about 22.9 million barrels were loaded at Yanbu, which was a 20% jump compared to the previous week, Windward said, citing vessel-tracking data from Vortexa.
“This acceleration reinforces Saudi Arabia’s strategic pivot toward Red Sea export routes to reduce reliance on Gulf transit corridors,” according to Windward.
Despite the pivot to Yanbu, Saudi Arabia cannot fully offset the loss of all the supply it was shipping through the Strait of Hormuz before the war.
Saudi oil giant Aramco has reportedly notified customers of term supply in Asia that they would receive in April only the flagship Arab Light grade loaded at the Yanbu export port on the Red Sea.
So far in March, Saudi Aramco has exported about 4.355 million barrels per day (bpd) of crude, according to Kpler data cited by Reuters. That’s way below the 7.1 million bpd in exports in February, before the de facto closure of the Strait of Hormuz.
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com
- UAE: Weaponizing Hormuz is Economic Terrorism Against the World
- Outage in Australia Adds to Global LNG Crunch
- Foreign Funds Ditch $50 Billion in Asian Stocks as Oil Shock Dims Prospects
