Saudi revives Hormuz shuttle to sustain exports amid rising risk and costs

Saudi Arabia has reintroduced a "shuttle service" through the Strait of Hormuz to continue crude oil exports amidst escalating risks and escalating costs. This method involves sailing tankers through the Strait, followed by ship-to-ship transfers in the Gulf of Oman to reload onto waiting vessels. The Wall Street Journal reported that this alternative route is now considered Saudi Arabia's best option for maintaining crude oil exports.

The International Energy Agency (IEA) estimated that rerouted crude exports, avoiding the Strait of Hormuz, offset about one-fifth of the crude supply decline in July and August due to the strait's closure. However, the east-west pipeline, which was shut down by an attack, and the growing threat of Iran-aligned Houthi rebels in the Red Sea have made this alternative route challenging.

To circumvent these issues, Saudi Arabia is employing a shuttle service through the Strait of Hormuz, with tankers typically operating under U.S. military protection at night or by disabling their automatic identification system (AIS) transceivers. Estimates vary, but commodities traders suggest that around 9 million barrels per day of crude and petroleum products are exiting the strait via this method.

Despite the risks, Saudi Arabia is compelled to maintain crude exports, given that oil accounts for over half of its fiscal revenue. Expediently repairing the east-west pipeline is crucial for resuming normal crude shipments.