Saudi Arabia’s oil shipments to its biggest Asian buyers, China and India, are likely to fall next month, as the ongoing war in West Asia continues to disrupt supplies, reported Bloomberg.
Saudi Aramco, the world’s largest oil exporter, is expected to send around 40 million barrels of crude to China in April. This is lower than usual levels. In February, shipments were about 48 million barrels.
Oil flows to India are also expected to decline. For April, exports to India are estimated at around 23 million barrels. This is slightly lower compared to recent months, when shipments ranged between 25 million and 28 million barrels, according to data from Kpler Ltd and Vortexa Ltd.
STRAIT OF HORMUZ DISRUPTION HITS SUPPLY
The fall in supply is linked to the ongoing conflict involving the US, Israel and Iran, which is now close to completing one month. The situation has disrupted the Strait of Hormuz, a key route for global oil shipments.
This waterway connects the Persian Gulf to major markets, including Asia. Due to the conflict, the route has seen near-total closure, affecting the smooth movement of crude oil.
Iran has launched attacks on energy infrastructure in the region, which has further added to supply risks. As a result, global oil prices have moved higher, increasing costs for importing countries.
Lower oil supply from Saudi Arabia to key buyers like China and India could have wider economic effects. Importing countries may face higher costs and may need to look for alternative sources of crude.
BlackRock Inc President Rob Kapito has warned that investors may not be fully pricing in the risks from the ongoing war. He said the situation could impact economic growth and push inflation higher, even if the conflict ends soon.
SAUDI ARAMCO REROUTES SUPPLIES
To manage the disruption, Saudi Aramco has started rerouting some of its oil supplies. Instead of shipping through the Persian Gulf, part of the crude is now being sent through a pipeline across the Arabian peninsula to the Red Sea port of Yanbu.
However, this is only a partial solution.
Yanbu has an export capacity of about 5 million barrels per day. This is lower than the 7.2 million barrels per day that Saudi Arabia was shipping before the conflict, mainly from Persian Gulf facilities.
Another limitation is that only Arab Light grade crude is being offered to Asian buyers through this route, which may not fully meet the needs of all refiners.
SUPPLIES TO EUROPE ALSO HIT
The impact is not limited to Asia. Some European refiners have also seen a cut in their April shipments. At least two refiners have received lower volumes, with one of them not receiving any supply at all for the month.
Earlier, Saudi Arabia had given long-term customers the option to receive their allocated oil from Yanbu instead of the Persian Gulf. This move is now being used as an alternative route amid the disruption.
The situation remains fluid, and much will depend on how the conflict develops in the coming weeks, especially around the Strait of Hormuz, which remains a key route for global oil trade.
