Saudi Arabia is reportedly looking to increase its crude oil shipments through the Strait of Hormuz even further, following an attack that halted operations on a key pipeline offering an alternative route, according to a person with knowledge of the matter.
The person, who requested anonymity because the plans are confidential, said that Saudi shipments through Hormuz in the first 10 days of this month have already increased compared to August, and the kingdom is now seeking to boost supply further.
Saudi Arabia shut down its East-West pipeline last week, putting millions of barrels of daily crude transport at risk at a time when the market is in urgent need of more supply. Saudi Aramco declined to comment, while the Saudi energy ministry said it had nothing to add beyond a statement released last Friday.
The Associated Press reported Monday, citing two regional officials, that the shut pipeline is expected to remain out of service for several weeks. U.S. Energy Secretary Wright, however, anticipates the pipeline could resume operations "very soon."
Nevertheless, any additional increase in crude shipments via the Strait of Hormuz must contend with a severe shortage of vessels, which has already pushed freight rates to record highs. Saudi Arabia possesses a large fleet of tankers but occasionally charters additional ships to support transport. On Friday, the cost of shipping crude from Saudi's Gulf port to China approached $1 million per day for the first time in history.
It remains unclear how quickly and by how much Saudi Aramco can increase its oil shipments through Hormuz to make up for the shortfall caused by the pipeline outage. The source indicated that in early September, Saudi Aramco had already raised its total crude exports to nearly 4 million barrels per day, with approximately 1 million barrels shipped via Hormuz and the remainder transported through the port of Yanbu on the Red Sea coast.
According to aggregated tanker tracking data from Vortexa and Kpler, Saudi Arabia's total crude exports in August had already fallen to around 3 million barrels per day, the lowest level in at least nine years.