Saudi Aramco has begun handling September crude allocations to some of its Asian customers on a case-by-case basis, highlighting the growing disruption to Saudi Arabia’s oil exports caused by escalating tensions around the Strait of Hormuz and the Red Sea.
Three people familiar with the situation said some Asian buyers are uncertain whether they will be able to secure vessels and physically lift the crude volumes allocated to them under existing contracts.
The unusual approach represents a departure from Saudi Aramco’s normal monthly allocation system, under which long-term customers submit their requested volumes after the company announces its official selling prices at the beginning of each month. Aramco typically confirms customers’ allocations around the 10th.
Asian refiners face uncertainty
Several Chinese refiners have reportedly yet to receive their September allocations.
Four Chinese buyers said they were still waiting for confirmation this week. Two of those companies, along with another Asian buyer, said discussions with Aramco had shifted toward negotiating individual cargoes and loading volumes rather than relying solely on the traditional monthly allocation process.
An Indian refiner said it had received its full contractual allocation but warned that the volumes could not be considered completely secure.
The company still needs to find vessels willing to transport the crude, and shipping risks in the region could prevent the cargoes from being lifted.
“Although our allocation is full, it is conditional,” the source said.
Saudi Aramco had not immediately commented on the situation.
Shipping risks disrupt oil flows
The uncertainty demonstrates how the conflict in the Middle East is affecting not only crude production but also the logistics required to move oil from Saudi Arabia to international customers.
The Strait of Hormuz is one of the world’s most important oil shipping routes, while the Red Sea provides another critical pathway for energy exports. Increased military activity and attacks on commercial vessels have made shipowners increasingly reluctant to operate in the region.
Saudi refiners typically purchase crude on a free-on-board basis, meaning buyers are responsible for arranging vessels to collect the oil.
That arrangement becomes much more complicated when tanker operators are unwilling to enter high-risk waters.
Saudi Arabia cuts prices to attract buyers
Saudi Aramco has also taken steps to make its crude more attractive to Asian refiners.
Earlier this month, the company reduced its September official selling price for Arab Light crude to Asia to a six-year low, a move designed to stimulate demand despite the increasingly difficult shipping environment.
But cheaper crude does not necessarily solve the problem.
Asian refiners may be willing to buy Saudi oil, yet the lack of available or willing tankers means they could struggle to physically transport it.
Houthi attacks add another layer of risk
The shipping situation has deteriorated further since the Houthis declared a maritime embargo against Saudi Arabia on July 20, opening another front in the wider conflict involving Iran, the United States and its allies.
The Houthis have subsequently claimed attacks targeting Saudi-linked tankers and oil infrastructure, including facilities at Yanbu and, more recently, the Jazan refinery on Saudi Arabia’s Red Sea coast.
The attacks have increased concerns among shipping companies about sending tankers into the Red Sea.
Saudi Arabia has attempted to provide an alternative by offering additional crude cargoes for loading from Sidi Kerir, an Egyptian oil terminal on the Mediterranean.
However, Asian buyers have been reluctant to use the alternative route because transporting crude from Sidi Kerir to Asia requires longer voyages, increasing both transit times and freight costs.
Saudi oil shipments to Asia fall sharply
The disruption is particularly significant because Asia is Saudi Arabia’s most important crude market.
Saudi Arabia shipped approximately 4.9 million barrels per day of crude to Asia last year, according to Kpler data.
But shipments fell below 3 million barrels per day in July, indicating a substantial decline.
The actual reduction may be difficult to determine because an increasing number of Saudi oil shipments are being conducted through so-called “dark voyages,” in which vessels obscure or limit tracking information, making export volumes harder to monitor accurately.
Global oil market watches closely
Saudi crude exports to Asia are closely monitored by traders and analysts because they provide an important indication of demand from the world’s largest oil-importing region.
If shipping disruptions continue, Asian refiners could be forced to look for alternative crude supplies from producers in places such as the United States, West Africa and Russia.
That could push up freight costs and increase competition for available barrels, potentially creating additional pressure on global oil prices.
