Aramco is engineering two new export corridors while Iraq eats a markdown to keep crude flowing

Gulf oil producers are running elaborate, expensive workarounds to keep crude moving — Aramco is studying new corridors and stashing barrels overseas, while Iraq is discounting steeply to move its own volumes through the same disrupted routes.

Aramco is building more redundancy

Aramco is studying a fourth and fifth crude-export corridors on top of the three it already uses, CEO Amin Nasser told Nikkei Asia. Engineering and feasibility work is already underway, he said, without disclosing where the new routes would run or when they could come online. He also warned the disruption “is not really getting better,” with Aramco only supplying term-contract buyers and pumping well below pre-war levels.

Two of the three existing routes hang on one pipeline. The first runs through Hormuz, with crude loading at Ras Tanura and crossing on shuttle tankers for ship-to-ship transfer outside the Gulf. The other two start with the 7 mn bbl / d East-West pipeline to Yanbu, which restarted at reduced rates last week after being knocked offline by drone strikes. From there, cargoes either sail south through Bab Al Mandab or go north through Egypt’s 2.5 mn bbl / d Sumed pipeline to Sidi Kerir on the Mediterranean — the only route that avoids both chokepoints.

Crude is moving again, even as a full restart for the pipeline is still six to eight weeks out. Total flows through the pipeline are now around 3.5 mn bbl / d, people familiar with the matter told Bloomberg — a figure that covers both export cargoes and the roughly 2 mn bbl / d a day that typically feeds west-coast refineries. Hormuz shipments are also at a war-time high above 5 mn bbl / d this month, most bound for Asia, both of the Kingdom's main export arteries are moving crude again, easing a squeeze that had left some European buyers being told they would get no term-contract barrels next month.

Saudi Arabia is loading crude at Yanbu again after the East-West pipeline came back to service — though volumes are still well short of where they were before the attack. Loadings at the Red Sea port have reached nearly 2 mn bbl / d since last week, and Aramco sent customers its October loading schedule on Monday, Reuters reports, citing trade sources and shipping data.

More storage closer to buyers: Aramco is also looking to expand its crude storage overseas, including in Japan, as another buffer against disruptions. The company holds 5.3 mn barrels of crude at Knoc’s Ulsan facilities in South Korea under a five-year storage agreement, which it expanded in June, while Riyadh and Abu Dhabi have separately asked Tokyo to expand their Japan-based stockpiles roughly tenfold from 8 mn barrels. Aramco is also among the companies weighing bonded storage at Pakistan’s Karachi and Gwadar ports.

Iraq is moving oil, but not cheaply

Shuttles are doing the heavy lifting for Baghdad: Iraq shipped an average of 2.6 mn bbl / d between 1 and 20 September, its best run since the US-Iran war began, AGBI reports, citing tanker-tracker Vortexa. That’s roughly 70% of where it was in February and nearly tenfold May’s low of 264k bbl / d. About 90% of Iraq’s crude now moves via shuttle: A tanker loads inside the Gulf, slips through Hormuz, and hands its cargo to a second ship waiting off Oman. Iran appears to be looking the other way on some shipments, analysts told AGBI.

The catch is the price: SOMO is knocking USD 26.5 off every barrel of medium crude, Al Jazeera reports. That’s painful for a state that runs on oil, which funds more than 90% of its budget. Baghdad is betting the workaround lasts: it has tendered for two supertankers on 180-day charters for Hormuz runs.