Amid escalating attacks by Houthi militants in the Red Sea, Saudi Arabia has strategically ramped up its oil exports through Egypt’s Sumed pipeline to the Mediterranean. This significant rerouting aims to bypass dangerous maritime chokepoints, with exports from Sidi Kerir more than doubling in August.
However, this alternative forces tankers to undertake longer, costlier journeys around Africa for Asian customers, leading to a “domino effect” in global crude flows as European and U.S. markets absorb more Saudi oil.
Saudi Arabia has significantly escalated its oil exports via a pipeline traversing Egypt to the Mediterranean Sea. This strategic pivot comes as Riyadh actively seeks viable alternatives to the Red Sea route, following a declared maritime embargo by Iran's Houthi allies.
According to data from the trade intelligence firm Kpler, oil exports from Egypt's Mediterranean port of Sidi Kerir more than doubled in August, reaching approximately 2.3 million barrels per day (bpd). This marks a substantial increase from roughly 1 million bpd observed in the preceding month. Matt Smith, Kpler's director of commodity research, confirmed that Saudi crude accounts for the majority of these elevated exports.
“This isn't a short-term decision,” Smith emphasized, indicating a profound shift. “This is a distinct change in strategy or dynamics.”
The Sumed pipeline serves as a critical link, connecting Sidi Kerir to the Red Sea port of Ain Sokhna. Historically, supertankers, being too deep to transit the Suez Canal fully loaded, would offload half their Saudi oil cargo into the pipeline at Ain Sokhna, proceed through the canal, and then reload the oil at Sidi Kerir.
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The Kingdom finds itself under considerable geopolitical pressure as Iran and its proxies intensify their influence over critical oil chokepoints throughout the Middle East. Earlier this year, Riyadh responded to Iran's threats to choke traffic through the Strait of Hormuz by rerouting millions of barrels per day via a pipeline from its eastern region to its Red Sea port of Yanbu.
However, recent Houthi assaults on Saudi tankers in the Red Sea are now directly impacting exports from Yanbu, particularly those reliant on transit through the Bab el-Mandeb Strait.
“It is a big dislocation that is happening here,” Smith observed. “It's clear that the Saudis are not taking this lightly, and they're expecting it to be a new trend.”
Kpler data further illustrates this disruption, showing Saudi exports from Yanbu through the Bab el-Mandeb Strait plummeting by nearly 90%. Exports dropped to 1.3 million barrels during the week of August 3, a stark contrast to the 11 million barrels recorded for the week of July 20, when the Houthis formally declared their embargo.
To evade potential Houthi targeting, tankers transporting Saudi crude in the Red Sea often operate with their transponders switched off, complicating precise tracking of oil flows. Nevertheless, Saudi Aramco CEO Amin Nasser confirmed during an August 4 earnings call that Riyadh possesses robust alternative routes to navigate around the southern Red Sea and the Bab el-Mandeb Strait.
“We have optionality, as you know, through multiple access routes and alternative pathways to the Mediterranean through Sumed pipeline and the Suez Canal,” Nasser affirmed.
Yet, this rerouting comes with its own set of challenges. Tankers must now embark on a significantly longer and more expensive journey around Africa to reach Saudi Arabia’s traditional Asian customers. Nasser specified that this extended voyage adds approximately 25 days compared to the conventional route through the Bab el-Mandeb.
Most of the oil exports from Sidi Kerir are currently destined for the U.S. and Europe, rather than Asia, as noted by Smith. This pattern suggests that Asian customers may be selling the cargo due to the economic impracticality of transporting it “all the way around Africa.”
“We're getting a domino effect here,” Smith explained. “Europe is getting more crude from Saudi, so maybe we see West African crude that would go into Europe now going to go to Asia.”
However, even with this strategic redirection of Saudi flows through Egypt, the threat of attacks is not entirely eliminated. On July 30, drones reportedly struck two liquefied natural gas ships at Egypt's Port of Damietta, although no group claimed responsibility for these specific incidents.
Infographic: Oil shipment routes and pipelines in the Middle East (Credit: CNBC)
