Saudi crude exports sink to new record low

Saudi Arabia’s crude oil exports fell for a third consecutive month in May, reaching the lowest level recorded in more than two decades as conflict-driven shipping disruption across the Gulf constrained the kingdom’s ability to move supplies to overseas buyers.

Exports dropped to 3.434 million barrels per day from 3.986 million bpd in April, data submitted to the Joint Organisations Data Initiative showed. The monthly decline of almost 14 per cent extended a steep contraction that began after shipments reached 7.276 million bpd in February.

May exports were about 53 per cent below February’s level, highlighting the impact of interrupted maritime traffic and logistical bottlenecks around the Strait of Hormuz. The waterway normally carries roughly one-fifth of global petroleum consumption and serves as the main export route for producers including Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and Qatar.

Saudi crude production recovered by 244,000 bpd during May to 6.560 million bpd. Output had fallen to an all-time low of 6.316 million bpd in April after standing at 6.967 million bpd in March and 10.882 million bpd in February.

The rebound in production did not translate into stronger exports because more crude was absorbed domestically and by refineries. Refinery throughput rose to 2.386 million bpd, while direct crude burning increased to 647,000 bpd as electricity demand climbed with the arrival of hotter weather.

Domestic consumption of petroleum products increased by 90,000 bpd to 2.667 million bpd. Saudi Arabia traditionally burns additional crude and fuel oil during summer to meet air-conditioning demand, although natural gas development and renewable-energy projects have gradually reduced the power sector’s dependence on liquid fuels.

The export decline reflects the continuing effects of the US-Iran conflict on Gulf shipping. Attacks, military warnings and restrictions around key sea lanes have prompted vessel operators to delay journeys, alter routes or demand higher insurance premiums. Some cargoes have been redirected towards Saudi Arabia’s Red Sea terminals through the East-West crude pipeline.

That pipeline connects production areas in the east with Yanbu on the Red Sea and provides an alternative to Hormuz. Its capacity, however, cannot fully replace normal Gulf export volumes. The route has also become more exposed after Yemen’s Houthi movement threatened vessels calling at Saudi ports and declared that Saudi-linked shipping could be targeted near the Bab el-Mandeb Strait.

Tankers carrying Saudi crude towards Asian markets changed course after the warning, underscoring the risk that disruption could spread from Hormuz to the Red Sea. Bab el-Mandeb connects the Red Sea with the Gulf of Aden and is essential for ships travelling between Asia, the Middle East and Europe through the Suez Canal.

A sustained threat to both waterways would leave exporters with limited alternatives. Tankers avoiding the Red Sea must travel around southern Africa, adding distance, fuel costs and delivery time. Higher freight rates and war-risk insurance costs could widen the difference between headline crude prices and the amount refiners ultimately pay for delivered barrels.

Saudi Arabia remains central to the OPEC+ alliance because of its large production capacity and ability to adjust output. The fall in recorded production during March and April was driven mainly by operational and export constraints rather than a deliberate long-term change in supply policy.

The kingdom had expanded production sharply before the conflict disrupted Gulf trade. Its February output was the highest since 2022, reflecting a series of OPEC+ supply increases intended to restore barrels withheld under earlier market-support agreements.

Lower Saudi shipments have tightened the availability of medium-sour crude grades favoured by refineries in Asia. Buyers have sought alternatives from Iraq, the United Arab Emirates, the United States, Brazil and West Africa, although differences in quality and transport costs limit direct substitution.