Saudi Arabia’s diversion of crude exports through the Strait of Hormuz is pushing ship-to-ship transfer operations in the Gulf of Oman to their limits, tightening the availability of supertankers and driving shipping costs sharply higher as Middle Eastern producers seek alternative routes following the disruption of Red Sea exports.
Saudi Aramco has sold more than 60 million barrels of crude for ship-to-ship transfers off Sohar, Oman, this month and next, according to trade sources and analysts cited by Reuters. The surge follows the September 13 attack on Saudi Arabia’s East-West Pipeline, which halted crude exports from the Red Sea port of Yanbu.
Saudi crude exports through Hormuz are expected to rise to about 3.6 million barrels per day in September, from roughly 900,000 bpd in August, according to Kpler data. That represents an increase of almost 3 million bpd and is creating a substantial additional requirement for very large crude carriers, or VLCCs.
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Kpler analyst Panagiotis Krontiras estimated that the additional Saudi volumes alone would require between 36 and 40 VLCCs, with each vessel capable of carrying about 2 million barrels of crude.
The pressure on shipping capacity is already evident in freight markets. The daily time-charter rate for a VLCC transporting Middle Eastern crude to China reached a record $1.27 million on Monday, according to LSEG data.
Anoop Singh, head of global shipping research at commodity broker Oil Brokerage, said the number of additional VLCCs needed to move the same volume of oil had risen to 40 in September from 24 in August.
“That 2 million bpd uplift in Saudi flows will generate additional demand for 15 VLCCs for shuttle runs alone,” Singh said in a September 23 note.
He added that another 20 VLCCs were effectively trapped in the Mediterranean while awaiting the restoration of Yanbu operations.
The disruption shows that a relatively localized infrastructure attack can create wider bottlenecks across the global oil transportation system. Saudi Arabia has been able to maintain crude exports by redirecting barrels through Hormuz, but the alternative route requires additional vessels and, in many cases, ship-to-ship transfers before the cargo can continue toward Asian refineries.
Hormuz Congestion Spreads Across Gulf Oil Trade
The pressure is not coming from Saudi Arabia alone. Increasing exports from other Gulf producers, including Iraq and the United Arab Emirates, are also relying on ship-to-ship transfers outside Hormuz, adding to demand for tugboats, crews and other services required to move crude between vessels.
Before the war, most crude cargoes from Gulf producers other than Iran were typically loaded directly onto vessels bound for their final destinations. The disruption has changed that pattern, forcing more cargoes into a transfer system that has limited capacity.
“VLCC STS operations have struggled to keep pace,” Vortexa analysts said in a September 21 note.
The company estimated that ship-to-ship transfers involving crude loaded on VLCCs from ports west of Hormuz have remained at around 6 million bpd since the end of August, equivalent to roughly three VLCC pairs beginning STS operations each day.
Congestion is now extending the amount of time required to complete transfers.
“Congestion is getting worse near the Strait of Hormuz due to long STS queues,” Vortexa analyst Emma Li said, adding that an STS operation now requires nearly 10 days, compared with five to seven days previously.
The longer turnaround times effectively remove vessels from the available tanker fleet for extended periods. That means even if sufficient crude is available, producers and buyers may struggle to find ships capable of moving it efficiently.
Chinese buyers are already asking sellers about alternative transfer locations, including waters off India’s west coast and Malaysia, Li said. Some are also seeking direct deliveries to refineries to avoid the increasingly congested STS network around Hormuz.
One example is the Bahri-operated VLCC Gold Shine, which loaded about 2 million barrels of Saudi crude at Ras Tanura earlier this week and was headed toward Quanzhou in eastern China, according to Kpler and LSEG data. Sinochem and Fujian Refining, which is partly owned by Saudi Aramco, operate refineries in the area.
The shift is also being felt farther east. South Korean refiner S-Oil, majority-owned by Aramco, is sending two VLCCs to conduct ship-to-ship transfers off Vadinar on India’s west coast, according to a trader involved in the Middle Eastern crude market.
There has also been increased crude-transfer activity around Malaysia’s Linggi transshipment hub, according to a tanker owner tracking movements through the Malacca Strait.
A Singapore-based shipbroker said the economics of moving oil are changing as congestion builds. In some circumstances, it may now be cheaper for a VLCC to discharge crude into smaller vessels, which can then transport it toward North Asia, rather than keeping the supertanker tied up for a longer direct voyage.
The immediate consequence is higher transportation costs, but the broader implications extend into the oil market. Longer voyages, higher tanker rates, and congestion increase the delivered cost of crude for Asian refiners. If the disruption persists, buyers may compete for both available cargoes and shipping capacity.
The episode also reveals the importance of Saudi Arabia’s alternative export infrastructure. The East-West Pipeline was designed to provide the kingdom with a route that reduces its dependence on Hormuz for exports from the Red Sea. With Yanbu disrupted, more Saudi barrels are being forced back through the strategically important strait, adding pressure to a maritime chokepoint already handling substantial volumes of Gulf crude.
While the oil itself is currently continuing to move, the cost and complexity of moving it are rising rapidly. The record VLCC rates and growing STS queues show that shipping capacity has become an important constraint in the Middle East oil trade. If Yanbu remains unavailable for an extended period, the strain on tankers and transfer infrastructure could intensify further.