Capacity and Security Limits Constrain Saudi Oil Rerouting

Following Iran’s closure of the Strait of Hormuz, Saudi Arabia quickly redirected its oil exports toward the Red Sea. However, a Houthi blockade has since rendered that route highly dangerous, forcing the kingdom to reroute shipments through Egypt. Security challenges persist, highlighted by recent drone strikes on two LNG tankers at the Egyptian port of Damietta. Consequently, OPEC’s leading producer is facing a severe shortage of viable export alternatives.

When Iranian actions paralyzed traffic through the world’s most critical oil chokepoint in early March, Gulf nations scrambled to find alternative paths. Saudi Arabia redirected its onshore Arab Light crude from the Persian Gulf to the 7 million barrels per day (bpd) East-West Petroline, terminating at the western port of Yanbu. Data from maritime intelligence firm Windward shows that Yanbu’s exports subsequently surged by 330% compared to pre-war levels, reaching approximately 2.47 million bpd.

By April, western shipments from Yanbu exceeded 4 million bpd, demonstrating the initial success of the diversion strategy. However, these volumes soon declined. According to Wood Mackenzie, Yanbu loadings dropped to 2.39 million bpd by June—a 41% decline from the March peak and a 66% decrease compared to the kingdom’s total January export volume of 7.96 million bpd across all terminals.

This drop-off was partly due to a temporary reopening of the Strait of Hormuz in late June following a brief ceasefire agreement between Iran and the United States. When that agreement collapsed, hostilities resumed, and the strait was closed once again. Recent Windward data indicated that only five tankers entered the strait and three exited on July 29, representing a mere fraction of historical traffic levels.

At the same time, Windward observed tanker activity at Yanbu operating in “dark mode” (with transponders turned off), including 12 vessels and two active ship-to-ship transfer operations. To bypass the blockade declared against them by Yemeni Houthi forces, Saudi vessels at Yanbu are now traveling north rather than south.

This tactical shift leaves Saudi Arabia heavily reliant on its last remaining maritime corridor: the Suez Canal and Egypt’s SUMED pipeline. Because the SUMED pipeline has a maximum capacity of 2.5 million bpd, it cannot accommodate all the volume previously carried by the East-West pipeline. However, Windward estimates that Saudi Arabia could successfully divert up to half of those volumes through this route.

Windward recently tracked three Saudi Very Large Crude Carriers (VLCCs) transporting crude from Yanbu to the Egyptian port of Ain Sukhna for injection into the SUMED pipeline. These tankers traveled in dark mode until they neared the Suez Canal. On the Mediterranean side, other tankers have been loading Saudi crude at the Sidi Kerir terminal for delivery to Asian markets.

While northern transit via Egypt remains active, Kpler notes that scaling up this route to match previous export levels will be highly difficult. The SUMED pipeline’s 2.5 million bpd capacity is already partially reserved by other nations, and the Suez Canal itself can only handle about 1 million bpd of crude. Without an unlikely lifting of the Houthi blockade, Saudi export volumes are expected to contract in the near term.

To offset the shortfall, other global producers must increase output. In a positive development, traffic through the Strait of Hormuz has shown a modest recovery. ING analysts reported that daily tanker transits, though still in the single digits, have risen. U.S. Energy Secretary Chris Wright noted that approximately 13 million bpd is currently flowing out of the Persian Gulf, representing about 65% of pre-war volumes.

Financially, Saudi Arabia is benefiting from a 47% rise in Brent crude prices since the start of the year, which has significantly reduced its budget deficit. Although second-quarter oil production fell by 25%—weighing on overall economic growth—the kingdom’s oil revenues rose by 28% compared to the first quarter. While high energy prices offer financial relief, Saudi Arabia’s geographic vulnerabilities remain a critical challenge.