A group of Saudi Arabian oil tankers idling in the Red Sea are showing tentative signs of easing, suggesting that whatever problems caused the build-up may be starting to abate.
At one point in the past week, up to 9 Saudi and two Chinese supertankers were anchored near Ain Sukhna, a terminal in Egypt from which oil can be delivered to storage tanks in the Mediterranean Sea. It has now been reduced to two, including the longest-waiting Saudi carrier, which is now moored at the facility.
Saudi officials have not commented on what caused the build-up, but the most likely explanation would be a lack of storage. It also comes at the end of a period when oil refineries in Europe and North America traditionally undergo routine maintenance, eroding their demand for barrels. The kingdom is cutting its crude output to prop up oil prices and pledged a further unilateral cut next month.
Normal practice would have ships unload their shipments at a terminal at the southern end of Egypt’s Suez Canal before sailing back to the Persian Gulf or Saudi Arabia’s Red Sea oil terminal at Yanbu.
In recent times, however, normal practice has been bucked back, holding up to 22 million barrels that refineries could really do with. That fell on Wednesday when a waiting ship gave up, and again on Thursday when the Wafrah, which had been anchored since June 1, docked. The two Chinese-owned ships arrived in May and are still there.
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Seven of the nine ships are owned by the National Shipping Company of Saudi Arabia, known as Bahri, the other two are owned by Taiping & Sinopec Financial Leasing Co.
VLCCs can unload full cargoes of 2 million barrels at Ain Sukhna, or they can unload about half that volume to reduce their draft enough to let them through the Suez Canal.
Most of Saudi Arabia’s supertankers usually deliver to Ain Sukhna without transiting the canal.
Mediterranean wave
It seems unlikely that refinery maintenance caused the build-up.
Shipments from Sidi Kerir, Egypt’s Red Sea port, rose to more than 830,000 barrels a day in the 20 days of this month, according to data from Vortexa. This is the terminal’s highest volume since April 2020, when Saudi Arabia’s exports soared before OPEC+ agreed to production cuts.
The gathering of Saudi tankers coincides with a strengthening of the physical Mediterranean oil market, which has recently lost a large supply of oil from northern Iraq that is not unlike the grade that Saudi Arabia can provide.
The build-up comes weeks ahead of a production cut of more than 1 million barrels per day by the kingdom, which is due to be implemented in July.
Tanker tracking suggests the cluster is unusually large. The amount of oil stored in the sea off the coast of Egypt has not been this high since at least 2016, according to Kpler data.
Despite the increase, Saudi Arabia’s total crude exports fell in May. The Kingdom shipped 7.5 million barrels a day in April, but that fell to 6.6 million barrels a day last month, and a similar flow has been seen so far this month, according to Kpler data.
–With assistance from Alex Longley, Sherry Su and Matthew Martin.
