Saudi oil surge sends tankers scrambling for space around Hormuz

Ship-to-ship transfers of Middle Eastern crude in the Gulf of Oman have reached capacity as Saudi Arabia increases shipments through the Strait of Hormuz, according to traders and analysts cited by foreign media.

Saudi Arabia has diverted more oil exports through Hormuz after an attack on its East-West Pipeline on September 13 halted exports from the Red Sea port of Yanbu. Saudi crude exports through Hormuz are expected to rise to 3.6 million barrels per day in September, up from about 900,000 bpd in August, according to Kpler data.

The increase is creating greater demand for very large crude carriers, or VLCCs, which are used to transport oil through the strait before cargoes are transferred to other vessels. Kpler estimates that the additional Saudi flows could require 36 to 40 more VLCCs, with each tanker capable of carrying about 2 million barrels.

The rise in tanker demand has pushed daily time-charter rates for VLCCs carrying Middle Eastern oil to China to a record $1.27 million, according to LSEG data.

The surge in Saudi exports has also added pressure to ship-to-ship transfer operations outside Hormuz, alongside rising exports from other Gulf producers including Iraq and the United Arab Emirates.

Traders and analysts said vessels are facing queues for tugboats and labour needed for ship-to-ship transfers. Vortexa said such operations now take nearly 10 days, compared with five to seven days previously.

The congestion has prompted some Chinese buyers to seek alternative transfer locations, including off the west coast of India and Malaysia, while others are asking for direct deliveries to refineries.

One example is the VLCC Gold Shine, operated by Saudi shipping company Bahri, which loaded 2 million barrels of Saudi crude at Ras Tanura and was heading for Quanzhou in eastern China, according to Kpler and LSEG data.

Meanwhile, South Korean refiner S-Oil is sending two VLCCs to conduct ship-to-ship transfers off Vadinar on India's west coast, according to a trader involved in the Middle Eastern crude market.

A tanker owner tracking activity in the Malacca Strait also reported an increase in crude transfers near Malaysia's Linggi transshipment hub.

A Singapore-based shipbroker said transferring crude from supertankers to smaller vessels could be cheaper than sending the large tankers directly to North Asia.

By Aghakazim Guliyev