Aramco offers Asian refiners crude via Fujairah

Saudi Aramco is extending crude supply options to Asian refiners outside the Strait of Hormuz, a move aimed at mitigating the impact of ongoing disruptions at the strategic waterway. The company is engaging privately with buyers for Arab Medium and Arab Heavy crude, which will be transferred between vessels off Fujairah in the UAE.

Some of these cargoes are slated for September loading. This approach diverges from Aramco's typical export system, which traditionally relies on established terminals and long-term supply contracts with Asian customers. By offering this alternative route, buyers can collect Saudi crude without having to navigate the Strait of Hormuz, which has become increasingly risky due to security concerns.

The specific method by which Aramco transports the crude to Fujairah remains undisclosed. The International Energy Agency estimates that Saudi Arabia and the UAE together possess between 3.5 million and 5.5 million barrels per day of pipeline capacity capable of circumventing the strait. This Fujairah option comes into play as Aramco handles September shipments to select Asian term customers on an ad hoc basis.

Shipping disruptions have made it challenging for refiners to secure vessels willing to load from Saudi Arabia's main export hubs. Security issues are impacting both the Hormuz and Red Sea routes, reducing the available alternatives for Saudi exporters. Maritime traffic through Hormuz has plummeted to a fraction of normal levels, with only six vessels recorded crossing the strait on Monday, compared to an average of 11 over a 10-day period.

The shipping restrictions have significantly curtailed Gulf crude and condensate exports, which totaled about 10.7 million barrels per day in July, roughly 40% below pre-war levels. Disruptions have also led to tighter inventories and heightened volatility in energy markets. Aramco's strategy mirrors measures taken by Abu Dhabi National Oil Company (ADNOC), which has expanded spot sales, introduced more flexible delivery arrangements, and developed a shuttle system for moving crude across Hormuz before transferring cargoes to buyers at safer locations.

ADNOC has also offered ship-to-ship delivery options and expanded sales to trading companies that were not previously part of its term customer base. Fujairah has grown increasingly significant to ADNOC's strategy due to its direct access to the Gulf of Oman. The UAE operates the Habshan-Fujairah crude pipeline, capable of transporting about 1.5 million barrels per day without traversing Hormuz.

Abu Dhabi is also developing additional infrastructure to bolster the resilience of its energy export network. As competition intensifies for Asian buyers, refiners have gained more leverage in negotiations regarding loading locations, shipping responsibilities, and pricing. Saudi Aramco has also utilized alternative routes, such as moving crude through the East-West pipeline to Yanbu on the Red Sea and supplying Arab Light to Egypt's Sidi Kerir terminal.

However, rising security risks along the Red Sea have made some Asian buyers wary of sending tankers to Yanbu, making collection points like Fujairah more attractive. Oil prices surged on Tuesday as doubts about reaching an agreement between Washington and Tehran heightened concerns over potential supply interruptions. Brent crude surpassed $91 a barrel, while West Texas Intermediate rose above $85, reflecting renewed anxieties over shipping through Hormuz and threats to vessels in the broader region.