Asian refiners are rerouting Saudi crude from the Red Sea through the Suez Canal and around Africa after Yemen's Houthis declared a naval blockade on Saudi Arabia, adding as much as four weeks to voyages and raising freight costs.
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Houthi blockade reroutes Saudi crude via Suez, adding 4 weeks to voyages
Asian refiners are seeking alternative routes for Saudi crude oil from the Red Sea port of Yanbu after Yemen's Iran-aligned Houthis declared a naval blockade on Saudi Arabia on July 20, threatening a chokepoint that carried about 7.4 million barrels of petroleum products daily in June.
"The Houthis' disruption comes at a difficult time for Saudi Arabia as its crude and products transiting Bab el-Mandeb climbed to a record last month at over 4 million barrels per day," said Matt Smith, commodity research director at Kpler.
The Liberia-flagged tanker Rodos, which loaded crude at Yanbu and was heading to India's west coast, signaled the Suez Canal on Tuesday, ship-tracking data from LSEG and Kpler showed. South Korean refiner Hyundai Oilbank sought a Very Large Crude Carrier to load at Yanbu with the option of using the Suez Canal and Egypt's SUMED pipeline, which links the Red Sea and Mediterranean Sea, according to a shipping source. A fully loaded VLCC cannot traverse the Suez Canal due to its draft limit, so shippers often lighten the vessel by moving a portion of oil through the SUMED pipeline before the ship picks it up on the Mediterranean side.
The blockade opens a potential new front in the US-Iran war that has already sharply reduced vessel crossings through the Strait of Hormuz to just four commodity vessels on Monday, down from about 130 per day before the conflict. If both the Strait of Hormuz and Bab el-Mandeb become inaccessible, nearly one-fourth of the world's oil and gas supplies could be disrupted, according to Kpler data.
Rerouting costs mount as tankers reverse course
Two oil tankers carrying Saudi crude to Asia reversed course in the Red Sea on Tuesday after the Houthi warning, shipping data showed. The Houthis sent an email to shipping companies on July 20 saying vessels should not load or discharge cargo at Saudi ports and that such activity "may result in being targeted by Houthi militia," according to a copy seen by Reuters.
Shipping west toward Egypt from Yanbu and passing through the Suez Canal or rounding the Cape of Good Hope in Africa will require as much as four additional weeks and raise freight and fuel costs, analysts and industry experts have warned, compared with the typical route of heading east from Yanbu to the Arabian Sea. Yanbu cargoes last used the canal in April for shipments to Europe, shipping data showed.
Saudi Arabia has increasingly relied on its Red Sea export terminal at Yanbu after disruptions in the Strait of Hormuz. The kingdom's 1,201-kilometer East-West pipeline, known as Petroline, can carry about 7 million barrels of oil a day from the Abqaiq fields to Yanbu. Exports from Yanbu averaged about 4 million barrels a day in recent weeks, compared with about 973,000 barrels a day a year earlier, Kpler and Signal Ocean data showed.
Oil prices rise as supply risks widen
Brent crude futures rose $1.62, or 1.8%, to $90.84 a barrel by 1152 GMT on Tuesday. "Lower exports through the Strait of Hormuz and concerns of potential supply disruption from oil coming through the Red Sea are moderately supporting oil prices," said Giovanni Staunovo, an analyst at UBS.
The International Energy Agency said it was closely monitoring the situation, noting that threats to Bab el-Mandeb were exacerbating concerns after months of disruption in the Strait of Hormuz. The IEA said member countries had released about 290 million barrels of oil from strategic stockpiles since a March 11 announcement that 400 million barrels would be made available.
The last time the Houthis targeted Red Sea shipping during the Gaza war between 2023 and 2025, major shipping companies rerouted vessels around southern Africa, raising transport costs and prompting US and British airstrikes as well as a multinational naval mission. A full closure of Bab el-Mandeb would halt Saudi oil exports to Asia and could reduce global oil supply by 7%, according to Kpler.
This article is for informational purposes only and does not constitute investment advice.
[1] Asian refiners look to Suez Canal to move Saudi oil amid Houthi shipping threats[2] Yemen's Houthis announce Saudi naval blockade: What it means for oil trade[3] Yemen's Houthis declare naval blockade against Saudi Arabia[4] Iran war live: Tankers turn back in Red Sea after Houthis declare Saudi blockade as conflict escalates
