The diversification of MEG trading patterns is already underway

MEG exporters are shifting their trade patterns to bypass local Ship-to-Ship transfers in favor of direct voyages and alternative hubs. Iraq is leading this diversification by using direct deliveries and long-distance Ship-to-Ship (STS) hubs, while Saudi Arabia is increasing its exports away from GoO transfers with the help of its national fleet.

This shift is driven by the need to circumvent the challenges of local shuttle hubs, which have led to longer turnaround times and higher freight rates. As of September, approximately 0.5 Mbd of MEG exports were not using the GoO STS, up from 0.7 Mbd in July and 1.0 Mbd in August. Iraq accounts for the majority of the volume shift, while Saudi Arabia is also contributing to the diversification trend with its recent expansion of MEG loadings.

The ownership profile of vessels engaged in these trades is diverse, with some vessels switching from shuttle to direct voyages. As MEG loadings continue to grow and STS capacity in the GoO remains limited, the region is likely to see a shift towards more diversified trading patterns. Longer voyage distances may increase the number of vessels required to navigate the Strait of Hormuz, leading to higher freight premiums.

The impact of higher Yanbu loadings, as the East-West Pipeline resumes operations, remains uncertain and will depend on the balance between increased MEG loadings and the reallocation of barrels to lower-risk areas.