Saudi Aramco initiates "alternative plan" for Red Sea transportation to address the long-term risk of the closure of the Strait of Hormuz.

Saudi Arabia is providing options for its long-term oil customers, allowing them to receive their oil quotas for April through the Yanbu port in the Red Sea, as the country is preparing for a potential long-term disruption in the Strait of Hormuz. According to traders informed by Saudi Aramco, buyers choosing to take delivery from Yanbu port can only receive a partial supply each month due to limited pipeline capacity to the port. Another option is to receive oil from the Persian Gulf, but there is a risk of not being able to receive any oil if the strait remains closed. Saudi Aramco, the world's largest oil exporter, exported 7.2 million barrels of crude oil last month, after Iran effectively blocked the Hormuz port, from which most of the oil is exported from its Ras Tanura and Ju'aymah terminals in the Gulf. Saudi Arabia has a pipeline with a daily capacity of 5 million barrels that runs through the country to the Red Sea, but the export capacity at Yanbu port may be lower than this. Saudi Arabia typically sells all of its oil through long-term contracts, with most going to Asia. Japan has started to use its national oil reserves. These choices reflect the uncertainty of the Middle East conflict potentially lasting longer and the uncertainty of the Strait of Hormuz being reopened in the short term. Trump's contradictory explanations for why the US is waging war have left allies and adversaries unsure of when he may seek to end the war. Even if he does seek to end the war, Iran has shown little willingness to cooperate. Traders say that if the war continues, oil shipped from Yanbu to Asia is likely to be sold on a delivered basis - meaning Saudi Aramco will be responsible for transportation logistics - rather than being sold on a free-on-board basis as usual, where customers arrange their own transportation. They also note that refineries are currently receiving only Arab light crude oil through Yanbu. Since the outbreak of war, Saudi Aramco has been increasing the volume of crude oil shipments through Yanbu port, which has now been going on for three weeks. The Saudi producer has also taken the unusual step of offering crude oil loaded from the port through spot market tenders. However, this is the first time the company has offered contract supplies from the Red Sea terminal. Apart from Asia, some European refineries have reportedly received less crude oil from Saudi Aramco than the amounts specified in their contracts. One large refinery will receive no shipment next month, while another refinery will receive a lower oil allocation than requested.