Yanbu rerouting options and Asian refining limitations

• Saudi crude flows via Bab el-Mandeb Strait that have been threatened by Houthis faces a new challenge with Lloyd’s of London’s reportedly withdrawing war cover for Saudi-linked vessels.
• In order to keep the oil flowing, Yanbu barrels would need to reroute north up the Red Sea. If the cargo was loaded on VLCC, the VLCC has to discharge part cargo at the 2.5 mbd Sumed pipeline at Ain Sukhna, transit through the Suez Canal at a lighter draft and reload the balance cargo from Sidi Kerir.
• Alternatively, the Yanbu barrels can be loaded onto Suezmaxes to transit through the Suez Canal. The barrels could then do a ship-to-ship transfer north of Suez into VLCC if so required.
• Thereafter the vessels will need to travel from the Mediterranean sea and detour round the Cape of Good Hope to get into Asia, which takes about 30 days more than the direct route, incur higher freight, working capital and handling costs.
• Market chatter of Korea already chartering a VLCC from Sidi Kerir shows how nervous the North East Asian refineries are to the situation in the Middle East, as the Strait of Hormuz remains effectively shut and Bab el-Mandeb is under real threat.
• The clear alternative in the market is more WAF barrels which seem plentiful at the moment with China not keen to buy. However the quality of WAF crude is not easily digested by Korean and Japanese players due to nitrogen and TAN limitations.
• Currently refineries in Asia (except China) are operating at high runrates (~80%), but expecting this would reduce by end Aug as the prompt delays in crude arrivals from the Middle East weigh on the operating feasibility of the sites.
• Meanwhile WTI will be well-bid by Asian refineries looking for diversification and supply security with Murban premiums sky-rocketing.

About the Author
June is a senior oil market analyst at Sparta specialising in global crude trade flows and refining economics across Asia and Europe. Her analysis is regularly cited by Bloomberg, the Financial Times, and Reuters. With a significant following in the energy community on X (@JuneGoh_Sparta), June’s insights are a staple for institutional traders navigating regional market shifts.
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