Saudi oil flows face new Red Sea strains

A Hong Kong-flagged very large crude carrier bound for Saudi Arabia’s Red Sea port of Yanbu has altered its route amid heightened security risks near the Bab el-Mandeb chokepoint. The empty supertanker New Champion made a U-turn in the Gulf of Aden after idling there during its voyage toward the Red Sea and is now sailing eastward instead of proceeding through the strait.

The rerouting follows recent attacks launched by Yemen’s Houthis as part of a blockade targeting ships linked to Saudi Arabia in the Red Sea area. The Bab el-Mandeb strait is a critical passage at the southern end of the Red Sea, and the threat of missiles and drones in the vicinity has become a significant operational concern for shipowners and charterers.

The increased threat level has spilled over into the marine insurance market. Some shipping insurance providers have in recent days been unwilling to offer coverage for vessels calling at Saudi Arabia, reflecting the perceived risk of attacks on ships approaching or using the kingdom’s Red Sea ports.

These insurance constraints raise the cost and complexity of arranging voyages linked to Saudi crude exports via the Red Sea. Ship and insurance brokers report that reluctance to underwrite such voyages is influencing route planning and is becoming a factor in commercial decisions about where and how to lift Saudi cargoes.

The uncertainty in the Red Sea is prompting some Asian oil buyers to reassess their logistics. Some are considering lifting Saudi-related cargoes outside the Red Sea corridor to avoid exposure to the most threatened waters and associated insurance difficulties.

At least one very large crude carrier has been provisionally arranged to pick up a cargo from Egypt’s northern coast for delivery to South Korea via the Cape of Good Hope. This provisional charter, described as the first such route in years, would significantly lengthen the voyage by sending the ship around Africa instead of through the Red Sea and Suez Canal.

Commentary on the evolving situation underscores that creating a more durable workaround to the Bab el-Mandeb risks would be technically and politically demanding. Bypassing this chokepoint on a sustained basis would require the use of one, perhaps two, additional pipelines and a larger fleet of oil tankers to maintain export volumes.

Any such reconfiguration would also depend on delicate regional diplomacy to keep alternative routes secure amid ongoing missile and drone threats. The need for extra infrastructure, more vessels, and complex coordination means that a lasting solution to the Red Sea vulnerability would not be easy or cheap to implement.