Saudi Arabia has sold about 60 million barrels of crude from its Ras Tanura export terminal inside the Strait of Hormuz for loading through ship-to-ship transfers at Oman’s Sohar port this month and next, according to multiple trade sources cited by Reuters, providing Asian refiners with an alternative route for securing Saudi oil amid disruptions to the kingdom’s normal export flows.

The shipments indicate that Saudi Aramco is maintaining a significant flow of crude from its Gulf terminals despite the disruption to exports from its Red Sea port of Yanbu following an attack on the East-West pipeline.

Aramco’s Gulf exports have recovered to an average of about 1 million to 1.5 million barrels per day, according to the sources. That is broadly in line with, or slightly above, August levels and has helped ease pressure in global oil markets by replacing some of the barrels affected by the slowdown at Yanbu.

Chinese and South Korean refiners are among the largest buyers of the spot cargoes, while additional supplies are heading to India and Japan, the sources said.

The increased availability of Saudi crude contributed to a decline in oil prices on Friday, with global futures falling by more than $1 a barrel. Traders were also responding to reports that Saudi Arabia could restore about half of the East-West pipeline’s capacity within days and was offering additional crude cargoes to Asian refiners through ship-to-ship transfers near Sohar.

The developments point to a rapid adjustment in the physical oil market as producers, refiners and shipping companies seek alternative ways to move crude around infrastructure and security constraints.

Sohar Becomes An Important Transfer Point

Sohar, outside the Strait of Hormuz, has emerged as an important point for transferring Saudi crude from larger Gulf shipments onto vessels bound for Asian customers.

The arrangement allows Saudi oil to continue reaching major Asian markets even as the disruption to the kingdom’s pipeline infrastructure changes the normal balance between its Red Sea and Gulf export routes.

Asia is the main market for Saudi crude, making the additional Gulf supplies crucial for refiners in China, South Korea, India and Japan. Japan’s refiners, in particular, say they have been able to maintain adequate supplies through November because of the alternative shipping arrangements.

The Petroleum Association of Japan said Friday that the country’s oil refiners had secured sufficient crude supplies through November, pointing to ship-to-ship transfers taking place outside the Gulf.

“In some cases, oil passes through the Strait of Hormuz at Saudi Arabia’s risk before being transferred to us outside the Gulf. For that reason, supplies from Saudi Arabia have not ceased entirely,” PAJ President Shunichi Kito said in Tokyo.

The comments reveal the logistical complexity of maintaining Saudi crude flows under current conditions. Oil can still leave Ras Tanura, but the route to Asian refiners involves additional transfers and exposure to risks around the Strait of Hormuz.

Higher shipping costs add to the disruption

The alternative supply routes are helping prevent a larger loss of Saudi crude from the Asian market, but they are also increasing transportation costs.

Supertanker freight rates reached record levels this week as demand for alternative crude routes increased. The rate to charter a very large crude carrier capable of carrying about 2 million barrels from Fujairah to Asia in early October reached 800 Worldscale, according to a shipbroking firm.

Higher freight costs could become an important part of the oil-market equation if the alternative shipping arrangements continue for an extended period. Even where crude remains physically available, more expensive and complicated transportation can raise the delivered cost for refiners.

The immediate market response, however, has focused on the additional Saudi barrels reaching Asia and the prospect of restoring part of the East-West pipeline’s capacity.

The reported 60 million barrels of crude scheduled for ship-to-ship loading in September and October represent a substantial flow of oil into a market that has been concerned about supply disruptions. Combined with the potential restoration of the pipeline, the additional shipments have reduced some of the immediate supply concerns that had pushed oil prices higher.

But the situation remains dependent on the security of Saudi export infrastructure and shipping routes. For Asian refiners, the ability to receive Saudi crude through Sohar provides an alternative channel, but the arrangement also demonstrates how disruptions to one part of the world’s oil infrastructure can quickly alter shipping patterns, freight costs and the pricing of crude across the region.

The Bank of Japan raised its policy rate by 25 basis points to 1.25% on Friday, taking borrowing costs to their highest level since 1995, but a split decision and limited guidance on further tightening sent the yen sharply lower.

The increase was widely anticipated, with nearly 90% of economists surveyed by CNBC expecting the BOJ to deliver a quarter-point hike. The decision nevertheless unsettled currency markets because two of the central bank’s nine policymakers voted against it, raising questions about how much support there is within the board for maintaining an accelerated pace of monetary tightening.

The vote was 7-2, with Toichiro Asada and Ayano Sato dissenting. Both were appointed by Prime Minister Sanae Takaichi earlier this year and are viewed as reflationists. Asada argued that core inflation was below the BOJ’s 2% target and that the economic situation might not be sufficiently strong to justify another increase, while Sato said economic and price developments had not accelerated substantially from their previous pace.

The hike marks a faster pace of normalization for the BOJ since it began dismantling its long-running ultra-loose monetary policy in March 2024. The latest increase came only three months after the previous hike, compared with a six-month interval before that.

In its policy statement, the BOJ said it acted because of the risk that inflation could deviate upward beyond its 2% target. The central bank said it wants underlying inflation to stabilize at around 2%, arguing that a sustained overshoot could eventually have adverse consequences for the Japanese economy.

The decision comes against a complicated backdrop for Japan’s policymakers. Inflation remains close to the BOJ’s target, while the yen continues to trade at historically weak levels against the dollar. Japan and the United States have also undertaken coordinated action aimed at supporting the currency.

Yet the immediate market reaction was the opposite of what a rate increase might normally imply.

The dollar climbed 1.2% against the yen to 157.84, its highest level in two weeks. The move put the Japanese currency on track for its biggest daily decline against the dollar since December and its strongest weekly loss since September 2024.

“They’ve just clearly underwhelmed versus expectations here,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

“And I think that one of the more staggering aspects of it was that they couldn’t even get the unanimous vote for that,” he added. “That really raised eyebrows in the market.”

The yen had strengthened sharply earlier in September, reaching its strongest level since February as investors increased bets that the BOJ would embark on a series of rate increases. Friday’s decision has complicated those expectations.

The issue for currency traders was not the 25-basis-point increase itself, which had been largely priced in, but what the decision said about the path ahead.

“The statement offered little additional hawkish guidance to support bullish Japanese yen positions,” said Frantisek Taborsky, a currency strategist at ING.

“The dissent from [Toichiro] Asada and [Ayano] Sato points to resistance against the fastest pace of rate increases in more than three decades and suggests they may increasingly act as a brake on further tightening,” he said.

The market reaction also highlights the difficulty facing BOJ Governor Kazuo Ueda as the central bank tries to balance inflation risks against concerns about economic growth and financial conditions.

Japan’s core inflation remained close to the BOJ’s target in August. The core measure stood at 1.7%, down from 1.8% in July, while headline inflation was 1.9%. Asada specifically pointed to the core reading in arguing for a pause.

The BOJ’s decision therefore leaves policymakers confronting two competing pressures. Inflation is sufficiently persistent for the central bank to worry about an upside deviation from its target, but some policymakers believe the underlying economy and price trends do not yet justify a faster tightening cycle.

For the yen, the uncertainty is growing larger because interest-rate expectations have become an important driver of the currency. Investors had been betting that Japan’s move away from decades of ultra-low rates would narrow the interest-rate gap with the United States and other major economies, supporting the yen.

That trade has become less straightforward as markets reassess the speed at which Japanese rates can rise.

The possibility of currency intervention remains another constraint on yen traders. Finance Minister Satsuki Katayama said Tokyo would not hesitate to conduct further coordinated action to support the currency, following a joint U.S.-Japan move in late July.

The warning means traders must weigh the BOJ’s monetary-policy trajectory against the government’s willingness to intervene if yen weakness becomes excessive.

The benchmark 10-year Japanese government bond yield fell 4.9 basis points to 2.947% after the decision, another indication that markets did not interpret the BOJ’s latest move as a clear signal of substantially faster tightening ahead.

For the central bank, the challenge now is communicating how much further rates can rise without creating unnecessary volatility in the economy or financial markets. The 1.25% rate is the highest Japan has seen since 1995, marking a significant shift from the negative-rate and ultra-loose monetary-policy era that defined the country’s financial system for decades. But Friday’s dissent means the next stage of normalization could be more contested within the BOJ than the headline rate increase suggests.

The data will now take on greater importance. With core inflation below 2% in August and the yen again under pressure, policymakers will need to determine whether price pressures are persistent enough to justify another increase or whether the economy requires a longer period at the current rate.