Saudi Arabia Pivots to Spot Oil Sales After Key Pipeline Goes Offline

This week, Saudi Arabia has been selling around 20 million barrels of crude oil in the spot market, to be collected just outside the Strait of Hormuz. The kingdom had to halt the key onshore pipeline after it was targeted by drone attacks launched from Iraq. Traders revealed to Bloomberg on Wednesday that Chinese refiners, state-owned giants and independent processors in East Asia, as well as crude processors in other countries, are the primary buyers of Saudi spot crude deals this week.

The Saudi sellers are delivering the cargoes for pick-up and loading onto other vessels this month and next, outside the Strait of Hormuz. Buyers will not be sending tankers through the Persian Gulf via Hormuz, but will load the cargoes through ship-to-ship transfers in the Gulf of Oman. Saudi Arabia shut down the 750-mile-long East-West oil pipeline following the drone attacks on Thursday.

The pipeline had been Saudi Arabia's main way to bypass the Strait of Hormuz after the regional conflict started, and it allowed the country to reroute most of its crude shipments from Persian Gulf ports to the Red Sea port of Yanbu. As a result, Aramco, Saudi's state-owned oil giant, has reportedly postponed or canceled some September deliveries to European refiners.

Ship-to-ship transfers of spot crude cargoes have become common in recent months. The UAE, through its national oil company ADNOC, has been offering prompt supply in multiple tenders both within the Persian Gulf and in the region outside the Strait of Hormuz.