Saudi Arabia's crude oil shipments through the Bab el-Mandeb Strait fell to near zero in August as heightened security risks in the Red Sea forced the OPEC producer to reroute supplies through Egypt and the Suez Canal, Kpler strategists said in a note on Tuesday.
Kpler analysts said the disruption has contributed to a build-up in Saudi crude inventories, which have reached multi-year highs, while longer voyages and higher freight costs threaten to constrain exports to key Asian markets.
Weekly Saudi crude transits through Bab el-Mandeb averaged more than 3.5 million barrels per day in early July, buoyed by increased exports from the Red Sea port of Yanbu, but have fallen sharply since mid-July and were close to zero in August.
Victoria Grabenwoger, senior research analyst at Kpler, said that the decline appears to be specific to Saudi-linked trade. Russian and Sudanese crude flows through the strait have remained relatively stable.
Saudi Arabia has responded by diverting more crude northward from Yanbu through the SUMED pipeline and Egypt's Suez Canal system, avoiding the Bab el-Mandeb route.
The latest data from Kpler shows that Saudi crude flows through the Suez Canal rose from virtually zero in May and June to almost 500,000 b/d by late July.
Crude departures from Saudi Arabia's Ain Sukhna terminal on the Red Sea reached 1.32 million b/d in July, nearly double June's 770,000 b/d and the second-highest monthly level on record.
The consultancy said at the other end of the SUMED pipeline, departures from Egypt's Sidi Kerir terminal surged to a record 2.4 million b/d in the first week of August, compared with a July average of 1.3 million b/d.
The destination of those cargoes is also shifting. Kpler said about 700,000 b/d of Sidi Kerir shipments are currently headed to Asian markets including Thailand, India and the Philippines, rather than traditional European destinations such as Poland, Italy, Lithuania and Spain.
The diversions are keeping Saudi crude exports moving but at the cost of significantly longer voyages.
Saudi Arabia's crude inventories rose to about 75 million barrels by early August, equivalent to 63% utilization, up from around 61 million barrels, or 52%, in June.
Meanwhile, Saudi Aramco is also adjusting its pricing strategy as it seeks to redirect some crude toward Europe.
The state-owned energy giant slashed its September official selling prices for European customers by $3 per barrel, a move that Kpler said could encourage higher Saudi crude flows to the region in the coming month.
Aramco also reduced September official selling prices for light crude grades to Asian customers by $0.50/bbl from August, broadly tracking the monthly decline in the Dubai forward curve.