Saudi Arabia is weighing a price increase of up to $5 per barrel on the crude it ships to Asia through the Suez Canal, Reuters reported, to cover freight costs driven up by the Houthi maritime blockade in the Red Sea. Cargoes now leave Egypt's Sidi Kerir and sail around Africa, a detour one source said could cost $10 million extra per shipment.
Saudi Arabia may raise the price of the crude it ships to Asia via the Suez Canal to reflect higher shipping costs due to the Houthi maritime blockade in the Red Sea, Reuters has reported. The price hike could reach $5 per barrel.
Behind that premium sits a change of route. Citing unnamed sources, the publication said Aramco was responding to the need to redirect oil flows from its Red Sea port of Yanbu to the Ain Sukhra port in Egypt, from where the crude gets transported via the Suez-Mediterranean pipeline to the port of Sidi Kerir, and from there to Asian markets.
The detour around Africa could cost $10 million per cargo
From Sidi Kerir, tankers carry the crude oil on to Asia around Africa, which extends the journey considerably and makes it more expensive. One of the Reuters sources said the rerouting could end up costing $10 million extra per cargo.
The route is also slower. The Suez-Africa passage makes the trip to Asia about a month longer than travelling through Bab el-Mandeb.
Tankers turn away from Bab el-Mandeb
Traffic through the Bab el-Mandeb Strait has materially slowed, and some vessel owners have their tankers move northward in the Red Sea toward the Suez Canal. One Saudi tanker has already taken the longer route.
Bloomberg reported that the supertanker Olympic Luck, partially laden with Saudi crude at Yanbu, transited the Suez Canal into the Mediterranean late on Sunday, according to shipping data.
Other tankers are U-turning from Bab el-Mandeb too, reflecting an increasingly complicated oil transport situation in the Middle East, with Hormuz remaining paralyzed and the main alternative route for Saudi crude also getting choked. Oil prices, however, are down again on reports that the U.S. and Iran have extended the pause in hostilities, raising hopes for peace negotiations.
Source: OilPrice.com
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