According to traders familiar with the situation, Saudi Aramco, the top global exporter, plans to send around 40 million barrels of crude to its Chinese customers in April. This figure is below the typical volume, as February’s exports were at 48 million barrels. Additionally, shipments to buyers in India are also projected to decrease.
The global oil market has been significantly affected by the escalating conflict involving the US, Israel, and Iran, which has now persisted for nearly a month. As Tehran has initiated assaults on energy structures in the region, crude prices have surged, and the Strait of Hormuz—an essential passage linking the Persian Gulf to global markets, including Asia’s largest economies—has nearly closed down.
The anticipated reduction in crude shipments from Saudi Arabia to key purchasers underlines the escalating economic effects of the conflict, with importers confronted with higher expenses and a pressing need to seek alternative suppliers.
Rob Kapito, President of BlackRock Inc., cautioned on Thursday that investors might be underestimating the risks associated with the war, which could adversely impact economic growth and increase inflation, even if the conflict were to conclude soon.
Disruption at Hormuz has led Saudi Aramco to redirect some crude shipments, utilizing a pipeline across the Arabian peninsula to the alternate port of Yanbu on the Red Sea coast. However, this ambitious initiative only partially mitigates the issue.
Yanbu has an export capacity of about 5 million barrels per day, which is less than the 7.2 million barrels per day shipped last month before the conflict, primarily from facilities in the Persian Gulf. Reports indicate that the oil offered to Asian refiners via Yanbu is exclusively of the Arab Light grade, the traders noted.
For India, exports are estimated at roughly 23 million barrels for next month, according to the traders, who preferred to remain anonymous due to the sensitive nature of the information. This figure is also slightly lower than in recent months, with February flows recorded between 25 million and 28 million barrels, as per Kpler Ltd. and Vortexa Ltd.
Previously, Saudi Arabia had provided long-term oil clients with the option to receive their allocated supply from Yanbu instead of from the Persian Gulf. Simultaneously, at least two European refiners experienced cuts in their April-loading volumes, with one receiving no shipments at all.
“Saudi Aramco continues to ensure reliable energy supply by utilizing alternative export routes through Yanbu in response to the changing regional circumstances,” the company stated. “We remain committed to fulfilling our customers’ expectations, adjusting loading schedules to reflect the new realities, and keeping customers informed.”
“Our priority is to maintain safe, reliable operations while supporting market stability during this period,” Aramco added.
Brent crude futures traded around $106 a barrel on Thursday. Before the war began, the global oil benchmark was close to $72 a barrel.
