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European Oil Markets
27JUL

Saudi crude abandons its Red Sea route

2 min read
10:27UTC

Saudi Arabia has loaded no crude through Bab el-Mandeb since the 23 July Houthi embargo, and 1.06 million barrels a day have poured into the Suez Canal instead.

EconomicDeveloping
Key takeaway

Saudi crude did not stop; it took the long way round through Suez at 106% higher canal traffic.

Saudi Arabia has loaded no crude for export through Bab el-Mandeb, the strait between Yemen and the Horn of Africa that links the Red Sea to the Gulf of Aden, since the Houthis declared an embargo on 23 July . The diverted volume has poured north into the Suez Canal, where crude traffic climbed 106% in a single week to 1.06 million barrels a day, on Kpler cargo tracking reported by AFP and carried on the AP and Reuters wires 1 2.

The Houthis are the armed movement that controls north-west Yemen and the eastern shore of the strait. Bab el-Mandeb is the southern gate for any Gulf cargo heading west toward Suez and the Mediterranean, so shutting it to Saudi loadings does not remove the barrels from the market; it reroutes them. Every cargo that once cleared the strait quickly now takes the long way round, and the arbitrage against Asian buyers resets with it.

To a spreads desk the position sits not in the flat price but in the physical shift. The reroute concentrates tonnage demand on the Yanbu-Suez leg, pulls crude north through a single contested corridor, and leaves the direction of Brent to swing on diplomatic headlines while the routing cost accrues on every barrel. Where that cost sits, and why the freight screens most desks read cannot see it, is the trade this week.

Deep Analysis

In plain English

Saudi Arabia normally ships crude oil out of Red Sea ports two ways: south through the Bab el-Mandeb strait near Yemen, or north through the Suez Canal towards Europe. When Yemen's Houthi rebels declared a blockade of the southern route on 23 July, tankers stopped using it completely, and traffic through Suez jumped 106% in a week to 1.06 million barrels a day. This matters because there is no easy third route; oil has to go one way or the other.

Deep Analysis
Root Causes

Saudi Red Sea crude has no third export corridor. Yanbu and Jeddah loadings must transit either Bab el-Mandeb south or the Suez/SUMED corridor north; a full Cape of Good Hope diversion adds roughly three weeks and was not attempted even during the 2024 Houthi campaign's worst weeks.

The binary nature of the route choice, rather than the Houthi threat itself, explains why the shift from partial bypass to total abandonment happened within days of the 23 July declaration instead of the gradual reallocation seen after the March peak documented by Wood Mackenzie.

What could happen next?
  • Consequence

    Suez Canal transit capacity, untested at this volume since March, becomes the binding constraint on Saudi Red Sea export flow rather than the Houthi blockade itself.

  • Risk

    A second chokepoint incident on the Suez/SUMED corridor would leave Saudi Red Sea crude with only the multi-week Cape of Good Hope diversion as a fallback.

First Reported In

Update #20 · Saudi crude reroutes to Suez, freight bites

The National· 27 Jul 2026
Read original
Different Perspectives
Asian buyers (India, Japan, China, South Korea)
Asian buyers (India, Japan, China, South Korea)
Asian refiners are absorbing 62% of Yanbu's 3.75m b/d flow, the bulk of Saudi Arabia's rerouted crude now clearing east rather than into the Atlantic basin. That destination split leaves Asian buyers more exposed to any single Yanbu-specific disruption than under the kingdom's normal multi-terminal export pattern.
Russia / Lukoil
Russia / Lukoil
Moscow loses the roughly $14-a-barrel legal headroom the frozen price-cap formula would otherwise have released toward $58, even as Urals trades below Russia's own $59 budget floor. The shadow-fleet insurance workaround the freeze leaves untouched remains the actual route sanctioned crude clears above $44 in practice.
European Union / Council
European Union / Council
Brussels adopted its 21st sanctions package on 23 July, letting boarding states confiscate and sell shadow-fleet cargo outright and freezing the G7 price cap's automatic adjustment to mid-2027, converting indefinite tanker storage into recoverable value for enforcers.
Freight and tanker desks
Freight and tanker desks
The Baltic Exchange's TD3C VLCC benchmark, most desks' reference for Gulf freight, prices a single-vessel voyage while Saudi shippers now pay for two Suezmax charters at roughly double the transit time. That gap leaves any book hedged purely on TD3C carrying unrecognised Suezmax basis risk on the bulk of Saudi rerouted volume.
Mediterranean refiners (Sines, Trieste, Augusta)
Mediterranean refiners (Sines, Trieste, Augusta)
Refiners already facing aframax rates up 198% month-on-month now watch Ain Sokhna draw 23% of Yanbu's rerouted crude through the same SUMED corridor they lean on for product backfill. Fujairah and ARA stocks near record lows leave little room to absorb a thinner Suez product flow.
Saudi Arabia
Saudi Arabia
Riyadh has rerouted its entire western-coast crude book through Yanbu and Suez since the 23 July Bab el-Mandeb embargo, absorbing a roughly $2m-per-voyage Suezmax premium on every diverted cargo. The kingdom's fiscal breakeven near $108 a barrel makes that freight cost, not the blockade itself, the more durable drag on export economics.