Saudi Arabia’s alternative route for exporting crude outside the Strait of Hormuz is becoming far more expensive as well. According to Reuters, war-risk insurance premiums for Saudi-linked tankers calling at the Red Sea port of Yanbu have tripled to around 3% of a vessel’s value, up from less than 1% in early July. At Saudi ports farther south, including Jizan, quoted premiums can reach 7%, while voyages through Hormuz are priced at 6% to 9%.
That means millions of dollars in extra cost for every cargo. A single voyage from Yanbu can carry roughly $3 million in war-risk insurance costs. From southern ports or via Hormuz, the bill can climb to $7 million, compared with at least $100,000 before the war. Shipping costs are also elevated, with charter rates running at no less than $500,000 per day and bunker fuel adding another $100,000 or more.
Saudi Arabia had spent billions of dollars building the East-West pipeline to reduce reliance on Hormuz. After Iranian restrictions cut traffic through the strait, the line had been moving roughly 4 million barrels per day across the kingdom to Yanbu. But drone attacks shut the pipeline earlier this month.
Aramco later restarted the line at reduced rates, yet Reuters sources said that as of Thursday crude loadings from Yanbu had still not resumed, despite earlier reports that shipments had been scheduled to restart.
The disruption has pushed Saudi Arabia back toward the Persian Gulf. Aramco sold about 60 million barrels for September and October loading from Ras Tanura, with the crude moving through Hormuz for ship-to-ship transfers near Sohar. Asian buyers took much of those volumes, while some European term customers were told they would receive no Saudi crude in October.
The Red Sea route is also exposed to security threats. Houthis have threatened Saudi-linked vessels around Bab el-Mandeb. Shipping companies, however, see a practical difference between the two chokepoints: Reuters sources said U.S. forces have provided some aerial support around Hormuz in recent months, while no comparable U.S. protection is operating in the Red Sea.
As a result, Saudi Arabia now has two export corridors, but both are burdened by the same mix of problems: costly ships, costly insurance, and much less certainty that crude will reach buyers on time.
