Insurance for Saudi oil exports through the Red Sea surges — OilPrice

In Saudi Arabia, the cost of insuring tankers carrying oil through the port of Yanbu on the Red Sea has risen significantly. War-risk insurance premiums for vessels linked to the kingdom in Yanbu have increased to around 3% of the tanker’s value, compared with less than 1% at the beginning of July, OilPrice reports, citing Reuters.

Insurance costs millions of dollars

In ports south of Yanbu, including Jizan, insurance premiums may reach 7% of a vessel’s value. For voyages through the Strait of Hormuz, the figure ranges from 6% to 9%. According to the publication, war-risk insurance for a voyage from Yanbu may cost about $3 million, while from southern ports or via the Strait of Hormuz it may cost up to $7 million.

Before the start of the war, such costs amounted to at least $100,000. Freight rates, according to the cited data, are at least $500,000 per day, while bunker fuel costs add another $100,000 or more.

Pipeline operates at reduced volumes

Saudi Arabia built the East-West oil pipeline to reduce its dependence on the Strait of Hormuz. After Iranian restrictions significantly reduced traffic through the strait, approximately 4 million barrels of oil per day were transported through the pipeline to Yanbu.

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Earlier this month, drone attacks halted the pipeline’s operations. Saudi Aramco subsequently resumed pumping at reduced volumes, but crude oil loadings in Yanbu had still not resumed as of Thursday, despite earlier reports of planned shipments.

Part of exports redirected through the Persian Gulf

The disruptions forced Saudi Arabia to use the Persian Gulf route again. Aramco sold about 60 million barrels of oil for shipment in September and October from Ras Tanura. The oil was transported through the Strait of Hormuz for ship-to-ship transfers near Sohar.

Asian buyers purchased a significant share of these volumes, while some European clients under long-term contracts were informed that they would not receive Saudi oil in October. At the same time, the Houthis threatened vessels linked to Saudi Arabia near the Bab el-Mandeb Strait. According to Reuters, US forces have provided some air support near the Strait of Hormuz in recent months, but there is no similar protection in the Red Sea.