Gulf Oil Bypasses Strait of Hormuz Amid Ongoing Security Risks

Gulf oil producers are finding new ways around the Strait of Hormuz, but this shift creates new risks. The flow of vessels moving out of the Gulf has trickled down to a mere couple per day, causing VLCC rates to balloon out of control and pushing assessed earnings for a Middle East-to-China voyage beyond $500,000 per day.

The latest example is Saudi Aramco's resumption of crude loadings at its key Ras Tanura export terminal. This move has led to VLCC fixing costs for inside-Hormuz cargoes jumping to a whopping $31 million per voyage, as seen with the Mongolia Prosperity supertanker.

Saudi Aramco is privately offering Arab Medium and Heavy cargoes through ship-to-ship transfers off Fujairah, allowing Asian refiners to collect September cargoes without sending tankers into the strait. This bypass strategy has been adopted by Riyadh as it deals with persistent security risks in the region.