Saudi Oil Sales Offer Asia Relief—but Hormuz Remains the Test

Saudi Arabia’s surge in crude sales to Asia is a response to a damaged export route, not a sign that the region’s shipping disruption is over. Bloomberg reported on September 24 that the kingdom had sold almost 100 million barrels to Asian buyers since the middle of the previous week, with October and November deliveries planned through the Strait of Hormuz. The volume may help refiners secure supply, but the decisive question is how much oil can be loaded and delivered safely. 2

Why the pipeline attack changed Saudi exports

The East-West pipeline carries Saudi crude across the country to the Red Sea port of Yanbu, allowing exports to bypass Hormuz. It was shut after a September 10 attack, disrupting a route that had been carrying roughly 4 million to 5 million barrels a day before the damage. That is principally a constraint on moving oil to an export terminal; it does not, by itself, establish an equivalent loss of oil production. 58

With the bypass impaired, selling more crude for shipment through Hormuz gives Saudi Arabia another way to reach buyers. It also shifts more of the delivery challenge onto a waterway already affected by conflict-related risks. The reported buyers include refiners in China, India, Japan and South Korea. 214

A restart is not a full recovery

Reuters reported that the pipeline restarted on September 22, but said a full restart could take six to eight weeks. An earlier Bloomberg report described work to bypass the damaged section and restore part of the line’s capacity first. A reported target for more meaningful flows by September 26 was a goal, not confirmation that pre-attack volumes had returned. 1315

Prospects for a restart have eased some concern about lost crude supplies and weighed on oil prices. They should not be mistaken for a completed repair or a guarantee of sustained price relief. 4

What the sales can—and cannot—do for Asia

Bloomberg described the deals as helping avert a looming Asian supply crunch. Reports also say Aramco has offered to arrange delivery to customers, an approach that could help buyers reluctant to organize their own shipments through the Gulf. Arranging transportation does not remove the risk of delays or unsafe passage. 22123

The nearly 100 million barrels are a total contracted volume, not an immediate daily increase in supply. Spread evenly across October and November, 100 million barrels would average about 1.64 million barrels a day; the sales figure alone does not show how many barrels are additional to previously expected exports. 2

For refiners and oil markets, the distinction is simple: sold, loaded and delivered are different milestones. Saudi sales can improve expectations now, while lasting relief depends on reliable pipeline flows and tankers completing their journeys through Hormuz. 12