Saudi Aramco shifts to ad hoc crude allocations as Houthi threats choke exports

Saudi Aramco is managing September crude oil allocations to some Asian term customers on an ad hoc basis after hostilities in the Strait of Hormuz and the Red Sea disrupted the kingdom's export operations, according to Reuters, citing three sources familiar with the matter.reuters

The departure from Aramco's standard monthly process — in which term buyers submit requested loading volumes after official selling prices are announced, with allocations typically confirmed around the 10th of each month — underscores the depth of supply disruption facing the world's largest oil exporter. Four Chinese buyers said this week they had not received their September allocations, with two of them and another Asian buyer saying volumes were instead being discussed individually with Aramco.reuters

Conditional Volumes and Vessel Uncertainty

An Indian refining source told Reuters that while the refiner received its full allocation, the volumes were not considered firm. "Although our allocation is full, it is conditional as we don't know whether we will be able to lift the cargoes," the source said, adding that Aramco was aware of the problem. Refiners traditionally purchase Saudi crude on a free-on-board basis and arrange their own shipping, but few shipowners now dare to enter the Strait of Hormuz or the Red Sea to load from Saudi Arabia's two main export terminals.bairdmaritime+1

Aramco did not immediately respond to a request for comment.reuters

Houthi Embargo and Darkened Exports

The Houthis declared a maritime embargo against Saudi Arabia on July 20, opening a new front in the broader Iran conflict. Since then, they have claimed attacks on Saudi-linked tankers, Yanbu oil facilities, and the Jazan refinery on the Red Sea coast. Reuters reported on August 12 that Saudi crude exports from the Red Sea are increasingly "going dark," with about 70 percent of west coast loadings in recent weeks involving vessels without continuous tracking coverage.reuters+2

Saudi Arabia has offered alternative cargoes from Egypt's Mediterranean port of Sidi Kerir, with exports from that terminal more than doubling to about 2.3 million barrels per day in August, according to Kpler data cited by CNBC. But Asian buyers have been reluctant to lift from Sidi Kerir given the longer voyages and higher freight costs.reuters+1

Pricing and Demand Signals

Aramco earlier this month cut its September official selling price for Arab Light to Asia to a six-year low in an effort to attract demand. Saudi crude shipments to Asia fell below three million barrels per day in July, down from 4.9 million bpd shipped to the region last year, according to Kpler data.reuters