Saudi Arabia’s dual export routes through the Red Sea and Strait of Hormuz are dismantling the narrative of a Persian Gulf supply disruption, sending physical crude premiums tumbling.
TREE NEWS reports: Preliminary ship-tracking data show Saudi Arabia’s crude exports in October have held near wartime highs, roughly matching September levels. Other major Gulf producers are also restoring exports toward pre-conflict levels, easing fears of a prolonged supply crunch.
The shift is already visible in physical prices: the Oman-Dubai crude spread, a key gauge of Gulf spot market strength, fell to its lowest since July earlier this month and stood at about $6 per barrel on Tuesday—down from nearly $34 in September, a drop of more than 80% in a single month.
Pipeline Repair Reopens Red Sea Lifeline
The core of Saudi export resilience lies in the restoration of the East-West pipeline, which had been forced offline by attacks, briefly leaving the kingdom dependent on its East Coast route via the Strait of Hormuz. With the pipeline back online, Saudi Arabia has reactivated the Yanbu export terminal on the Red Sea coast, allowing it to run both routes simultaneously while maintaining high-volume shipments despite ongoing Houthi attacks.
Vortexa data show Saudi exports via the Red Sea (mainly Yanbu) at 2.5 million barrels per day (bpd) so far in October, up from 2.4 million bpd in September. Persian Gulf exports stood at 4.0 million bpd, slightly below September’s 4.2 million bpd, as that route remains subject to intermittent attacks. Combined, Vortexa estimates October exports at about 6.5 million bpd, essentially flat versus 6.6 million bpd in September.
Estimates diverge widely, however. Tankertrackers.com puts October exports at about 6.99 million bpd, close to pre-conflict levels, while Kpler estimates just 5.4 million bpd, below September. The discrepancy stems largely from tankers turning off satellite transponders to avoid attack risk, complicating tracking and creating an information blind spot for traders assessing regional supply.
Buyers Return to Yanbu; European Spot Sales Resume
Saudi Aramco is actively rebuilding its buyer base at Yanbu. Some Asian buyers have been asked to resume lifting from Yanbu starting in November, after a three-month hiatus during which they took oil via shuttle tankers and pipeline links through Egyptian Mediterranean ports to avoid Red Sea threats. In Europe, Aramco has notified buyers whose contracts were previously cancelled that they can bid for spot cargoes for this month and next to make up for shortfalls.
Saudi Arabia has reported to OPEC that its September output rose by a third to more than 8.3 million bpd, a wartime high. Domestic refineries typically consume about 3 million bpd, but the 400,000-bpd Jizan refinery remains offline due to Houthi attacks.
Gulf Supply Normalization Broadens
Beyond Saudi Arabia, other Gulf producers are normalizing. Kuwait, which relies entirely on Hormuz, has seen exports return to pre-conflict levels. Iraq’s exports last month were near pre-war levels. The UAE has been most successful in transiting tankers through Hormuz, with output rising to record highs.
The synchronized improvement has compressed the Middle East physical risk premium. The Oman-Dubai spread’s collapse from nearly $34 in September to about $6 this week signals that market fears over Gulf supply have been substantially alleviated.
Yet the region is not fully stable. Houthi attacks on Saudi airports and oil facilities continue, recently disrupting operations in Riyadh’s financial district and exerting broader pressure on the Saudi economy. Reduced tanker transparency also keeps uncertainty over true supply levels elevated. For Saudi Arabia, maintaining high export volumes while preserving wartime oil revenue remains a dual challenge.
Key Takeaways for Investors
- Oil price risk premium deflating: The collapse in the Oman-Dubai spread suggests the market is pricing out a significant geopolitical risk premium. This could cap upside for Brent and WTI in the near term, though headline attack risks remain.
- Physical vs. futures divergence: While physical premiums have fallen sharply, futures may lag. Traders should watch for further convergence as supply data confirms the trend.
- Refining margins and product markets: With Saudi domestic refining constrained by the Jizan outage, product markets may stay tighter than crude, supporting diesel and jet cracks.
- Data uncertainty is a risk: Divergent export estimates due to transponder shutdowns mean positioning on supply data carries higher-than-usual uncertainty. Investors should demand multiple sources and be wary of single-data-point trades.
- Watch Houthi escalation: Continued attacks on Saudi infrastructure, including Riyadh’s financial district, pose tail risks to both oil and Saudi equities. A re-escalation could quickly revive the risk premium.
