Aramco offers Asian refiners crude via Fujairah

Saudi Aramco is offering crude to selected Asian refiners from outside the Strait of Hormuz, opening another supply route as prolonged disruption at the strategic waterway reshapes Gulf energy exports.

The company is negotiating privately with buyers for Arab Medium and Arab Heavy crude to be transferred between vessels off Fujairah in the UAE. Some of the cargoes are intended for September loading. The arrangement is unusual for Aramco, whose traditional export system relies heavily on established terminals and long-term supply contracts with Asian customers.

The method would allow buyers to collect Saudi crude without sending their vessels through the Strait of Hormuz. It follows a broader shift among Gulf producers towards alternative delivery points as security risks constrain tanker movements through waters linking the Gulf with the Arabian Sea.

How Aramco moved the crude to Fujairah has not been disclosed. Saudi Arabia operates an East-West pipeline capable of transporting crude from production areas in the east to Yanbu on the Red Sea, while Fujairah lies on the UAE’s eastern coast and outside Hormuz. The International Energy Agency estimates that Saudi Arabia and the UAE together have between 3.5 million and 5.5 million barrels a day of available pipeline capacity capable of bypassing the strait.

The Fujairah option comes as Aramco manages September supplies to some Asian term customers on an ad hoc basis. Shipping disruptions have made it harder for refiners to secure vessels willing to load from the kingdom’s principal export areas. Security concerns are affecting both Hormuz and Red Sea routes, complicating the alternatives available to Saudi exporters.

Traffic through Hormuz remains a fraction of normal levels. Six vessels were tracked crossing the strait on Monday, three entering the Gulf and three leaving, compared with a 10-day average of 11. Only three crossings were recorded on Saturday and two on Sunday. No very large crude carriers or liquefied natural gas tankers were observed among those movements, although vessels travelling with transponders switched off may not appear in tracking data.

The shipping restrictions have cut Gulf crude and condensate exports substantially. Combined exports from Saudi Arabia, the UAE, Iraq, Kuwait and Iran stood at about 10.7 million barrels a day in July, around 40% below pre-war levels. Disruption has also contributed to tighter inventories and heightened volatility across energy markets.

Aramco’s approach resembles measures adopted by Abu Dhabi National Oil Company. ADNOC has expanded spot sales, introduced more flexible delivery arrangements and developed a shuttle system for moving crude across Hormuz before transferring cargoes to buyers at safer locations. It has also offered ship-to-ship delivery options and widened sales to trading companies that were not traditionally among its term customers.

Fujairah has become increasingly important to that strategy because it provides direct access to the Gulf of Oman. The UAE already operates the Habshan-Fujairah crude pipeline, which can transport about 1.5 million barrels a day without passing through Hormuz. Abu Dhabi is developing additional infrastructure as it seeks to strengthen the resilience of its energy export network.

Competition for Asian buyers is adding another dimension to the logistical adjustments. Asia remains the principal market for Gulf crude, and refiners have gained greater leverage in negotiations over loading locations, shipping responsibilities and pricing as producers seek to preserve sales during disrupted maritime conditions.

Aramco has also used routes farther west. Crude has been moved through the kingdom’s East-West pipeline towards Yanbu, while Arab Light supplies have been routed through the Red Sea and Egypt’s Sidi Kerir terminal. Rising security risks around the Red Sea, however, have made some Asian buyers reluctant to send tankers to Yanbu, increasing the appeal of collection points such as Fujairah.

Oil prices strengthened on Tuesday as fading prospects for an agreement between Washington and Tehran increased concerns over supply interruptions. Brent crude traded above $91 a barrel while West Texas Intermediate moved above $85, reflecting renewed anxiety over shipping through Hormuz and threats to vessels elsewhere in the region.