Red Sea alternative to Strait of Hormuz? Saudi Arabia's offer to oil buyers amid supply crunch

As the Middle East crisis escalate and Iran continues to choke Strait of Hormuz, Saudi Arabia has moved to pitched another option to its long-term oil buyers. The kingdom is offering long-term buyers the choice to receive their April crude shipments through its Red Sea port of Yanbu, amid ongoing disruptions in the Strait of Hormuz. Traders familiar with the plan said customers opting for Yanbu will get only part of their monthly allocation because the pipeline feeding the port cannot carry full volumes.

Alternative route is to still take oil from the Persian Gulf, but risk receiving nothing if the strait remains blocked, Bloomberg reported.

Before Iran effectively blocked the strait, Saudi Aramco, the world’s largest oil exporter, shipped 7.2 million barrels last month, mostly from its Gulf terminals at Ras Tanura and Juaymah. Saudi Arabia’s 5 million barrel-per-day pipeline to the Red Sea provides an alternative route, though Yanbu’s export capacity may be lower.



Most of Saudi Arabia’s oil is sold via long-term contracts, primarily to Asian buyers. In response to supply concerns, China’s Sinopec has cut refinery run rates by 10%, while Japan has begun releasing crude from national reserves.

The options reflect uncertainty over the conflict’s duration and when the Strait of Hormuz may reopen. Traders noted that if the war continues, oil shipped from Yanbu to Asia could be sold on a delivered basis, with Aramco handling transport, rather than the usual loading basis, where customers organise shipping themselves. Only the Arab Light grade is being offered from Yanbu.




Since the war began nearly three weeks ago, Aramco has increased shipments through Yanbu and has, unusually, offered crude via spot market tenders. However, this is the first time contracted supply is being offered from the Red Sea terminal.

Some European refiners are also facing reduced allocations. One major processor reported receiving no volumes for next month, while another was allocated less than requested.

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