So far this week, Saudi Arabia has sold as many as 20 million barrels of crude oil in the spot market to be picked up from just outside the Strait of Hormuz, after the Kingdom was forced to shut down the key onshore pipeline that helps it bypass the chokepoint, unnamed traders with knowledge of the matter told Bloomberg on Wednesday.
Chinese refiners, including state-held giants and independent refiners, as well as crude processors in other East Asian countries, have been the main buyers of the Saudi spot crude offerings this week, according to Bloomberg’s sources who wished to remain anonymous.
The Saudis are selling the cargoes for pickup and loading for this month and next onto other vessels outside the Strait of Hormuz. This means buyers will not be sending tankers into the Persian Gulf via Hormuz, but will load the cargoes in ship-to-ship (STS) transfers in the Gulf of Oman.
Late last week, Saudi Arabia shut down its East-West oil pipeline following drone attacks launched from the territory of Iraq close to the Iranian border on Thursday.
The 750-mile-long East-West pipeline became Saudi Arabia’s vital oil route to bypass the Strait of Hormuz after the Middle East conflict started and Hormuz was closed to shipping traffic. Thanks to the East-West pipeline, the Kingdom has managed to re-route most of its crude loadings from its eastern ports in the Persian Gulf to the Red Sea port of Yanbu.
After the East-West pipeline outage, Saudi oil giant Aramco has reportedly canceled or delayed some September deliveries to European refiners.
The STS transfers of spot crude cargoes have been perfected in recent months by the United Arab Emirates (UAE), whose national oil company ADNOC has offered prompt supply in multiple tenders both within the Persian Gulf and the Fujairah-Sohar range outside the Strait of Hormuz.
By Tsvetana Paraskova for Oilprice.com
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