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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Saudis Won’t Suspend Oil Exports To The West

oil storage

Aramco is unlikely to suspend West-bound crude oil exports after the Houthi missile attacks against two Saudi tankers in the Bab el Mandeb strait, The National reports citing oil analysts. Riyadh announced that it would stop shipments via the chokepoint after the attacks, and this sparked worry that Saudi exports would be disrupted, raising prices.

However, it is unlikely that Saudi Arabia would allow such a dent in exports.

“Overall Saudi export volumes should not be reduced by this decision, although there will be some short-term disruptions and the announcement has created concerns in the crude market and related areas such as shipping insurance,” Richard Mallinson from Energy Aspects said.

Some of the alternative routes that Saudi oil could be shipped through include the maritime route via the Horn of Africa, which is longer and more expensive, and the East/West Saudi pipeline to the Yanbu refinery on the Red Sea. From Yanbu, the crude could be shipped via the Suez Canal, Iman Nasseri from Facts Global Energy told The National.

In any case, for a while Saudi exports to the West will be more expensive, but this should not be a major problem for Aramco. The company only ships around half a million barrels daily via the Bab el Mandeb chokepoint, compared to an average daily total of 6 million barrels. Related: Ford Starts Up $4B Autonomous Vehicle Unit

What’s more, Saudi Arabia has built substantial oil inventories in Egypt that it can now use to keep its European clients supplied until the shipment suspension lifts.

Bab el Mandeb is one of the most important oil chokepoints globally, accounting for as much as 5.8 million barrels of oil and oil productions daily as of 2016, and probably more today. While in the past the main risk in the area came from African pirates, the war in Yemen has added the risk of missile attacks from the Arabian Peninsula as well.

By Irina Slav for Oilprice.com

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  • william Stewart on July 30 2018 said:
    this isn't any surprise. they need the revenue from the oil just to run the country and will find a way to continue
  • Mamdouh G Salameh on July 30 2018 said:
    Saudi Arabia is in the lucky situation that it can bypass the Strait of Bab al-Mandeb completely and even the Suez Canal without affecting its oil exports to Europe.

    Through its 750-mile East-West oil Pipeline known as the ‘Petroline' pipeline , which runs across Saudi Arabia from the oil fields in the East to the Red Sea in the West at the Yanbu port, Saudi Arabia could transport up to 4.8 million barrels a day (mbd).

    Oil tankers would be loaded at Yanbu and travel from there towards the Suez Canal and the Mediterranean.

    Alternatively, Saudi Arabia could supply its European customers from its substantial oil inventories in Egypt through the Sumed pipeline, which bypasses the Suez canal and connects the Mediterranean to the Red Sea.

    Even if the Strait of Hormuz was to be closed, Saudi Arabia could still export almost half of its oil its oil through the Petroline to Europe via the Suez Canal and the Sumed pipeline.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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