Saudi Arabia Diversifies Oil Shipments Amid Houthi Threats

Saudi Arabia, the world's top oil exporter, is redirecting its crude shipments due to escalating threats from Yemen's Houthi rebels. The rebels have blocked Red Sea passages, prompting Saudi Arabia to rely more heavily on an Egyptian pipeline and reactivating shipments through the Strait of Hormuz in the Persian Gulf.

Reports indicate that Riyadh has reduced oil flows through Bab el-Mandeb Strait since August 26, following a maritime blockade announced by the Houthi movement. The kingdom had previously transported crude from its eastern fields to Yanbu via a cross-country pipeline and then loaded it onto tankers for delivery to Europe and Asia.

With this route now deemed hazardous, Saudi Arabia is using alternative methods to export oil, including moving crude northward along the Red Sea to Egypt. The SUMED pipeline has seen increased flows, from less than 650,000 barrels per day in June to over 1.9 million barrels this month.

However, for Asian buyers such as Korea, China, and Japan, this route forces tankers to navigate around Africa's southern cape, adding two to four weeks to voyage times and increasing fuel and operational expenses by at least $5 per barrel. According to Matt Smith, Kpler's chief oil analyst, Asian buyers may need to seek alternative supply sources or accept higher costs.