Gulf of Oman STS Hub Hits Its Limit as Saudi Crude Surge Drives Tanker Rates to Record

Ship-to-ship crude transfer operations in the Gulf of Oman have run out of room. Saudi Arabia began routing oil through the corridor after a September 13 attack knocked out the East-West Pipeline, which had been supplying the Red Sea port of Yanbu. With Houthi forces blocking the Red Sea route, the Gulf of Oman became the only realistic path for Saudi crude to reach Asian buyers.

September exports from Saudi ports on the Gulf side reached 3.6 million barrels per day, up from 900,000 barrels per day in August. Most of that oil passes through ship-to-ship transfers anchored off Sohar, Oman. Saudi Aramco alone has committed more than 60 million barrels for STS handoff there through September and October, according to traders and analysts. Handling that volume requires an additional 36 to 40 VLCCs in the shuttle circuit.

The hub cannot absorb all of it. Transfers that used to take five to seven days now stretch past ten as queues build for tugboats, labour and equipment. Charter rates on the Middle East-to-China route hit $1.27 million per day, a record. Saudi Arabia began rerouting crude oil exports through ship-to-ship transfers off Sohar, Oman, after the East-West Pipeline attack, and the load has kept building since.

Asian refiners have started dispersing transfers to reduce pressure on the congested anchorage. South Korean buyers have arranged ship-to-ship operations at India's Vadinar coast. Malaysian terminals at Linggi have accepted others. Some Chinese refineries took direct deliveries, bypassing Sohar altogether.

The first LNG cargoes through the Strait of Hormuz since July made the crossing in the week of September 18, giving gas producers a partial read on corridor conditions before the crude volumes peaked.