Aramco weighs discounts on Oman ship-to-ship crude as exports climb

Middle East crude exports are on track for their strongest month since the disruptions began. Seven major producers are set to ship 12.8 mn bbl / d in September, led by Saudi Arabia and the UAE, Reuters reports, citing Kpler data. Despite the uptick, that is still some 6 mn bbl / d below February levels.

By the barrel: Saudi exports are on track for 5.4 mn bbl / d, while an earlier Kpler reading put UAE shipments at 3.2 mn bbl / d by mid-September. Iraq’s Oil Ministry put its own September export average at 2.6 mn bbl / d, while Kuwait was exporting around 1 mn bbl / d in early September.

Most of these barrels change hands at sea: Producer-operated and other risk-tolerant tankers take crude through Hormuz, and buyers pick it up in ship-to-ship transfers off Fujairah and Sohar. The UAE, Qatar, Iraq, and Kuwait have all offered crude for collection outside the strait. Saudi started leaning on shuttling after its East-West pipeline was targeted and temporarily closed. Last week, 19 Saudi supertankers carrying some 2 mn barrels each left the strait, and shipments from Ras Tanura on the east coast have jumped to c. 3.6 mn bbl / d from 929k bbl / d.

Why it matters: A transfer off Oman now takes nearly 10 days, and freight costs are climbing. About 7.4 mn bbl / d of crude is set to pass through Hormuz this month, according to Kpler, and the offshore handoff is running out of room. Saudi Arabia's extra volumes, on top of transfers by other producers, have left tankers waiting for tugboats and transfer crews. Transfers used to take five to seven days, and the extra shuttle trips are tying up supertankers that would otherwise be available for charter.