Saudi Oil Can Still Move to Market Today, but at What Cost

Energy News Beat

In the shadow of the ongoing Iran conflict that has repeatedly disrupted the Strait of Hormuz, Saudi Arabia’s East-West Pipeline (also known as the Petroline) has proven a critical lifeline. Built roughly 40 years ago and restored to a maximum capacity of about 7 million barrels per day (bpd) earlier in 2026, this conduit moves crude from the Eastern Province oil fields across the kingdom to the Red Sea port of Yanbu. From there, tankers can load and sail, bypassing Hormuz entirely and keeping a substantial portion of Saudi exports flowing to global markets.

That workaround now faces its own threat. Yemen’s Iran-backed Houthis have targeted Saudi-linked shipping and infrastructure in the Red Sea, declared aspects of a naval blockade focused on Saudi vessels, and positioned missiles and drones near the Bab el-Mandeb Strait—the narrow chokepoint at the southern end of the Red Sea. Attacks this week on Saudi oil tankers and facilities near Jizan and Yanbu have underscored the risk. As Bloomberg Opinion columnist Javier Blas noted in his July 25 analysis, the Saudis may need “a bypass for the bypass.” Engineering a new detour around Bab el-Mandeb “would require the use of one, perhaps two, extra pipelines, quite a lot of oil tankers and a good dosage of Middle Eastern cloak-and-dagger diplomacy to keep everything running despite the threat of missiles and drones. It won’t be easy—or cheap.”

Routes Out: Suez, Cape, Pipelines, and Tankers

Saudi crude loaded at Yanbu has two primary sea exits from the Red Sea: northward through the Suez Canal (or the parallel Sumed pipeline in Egypt) toward the Mediterranean and Europe, or southward through Bab el-Mandeb into the Indian Ocean for Asia and other markets.

• Suez Canal / Sumed option: This remains available for northbound voyages. It is the shorter path for European destinations. However, if Bab el-Mandeb is effectively closed or too risky for southbound Asia-bound cargoes, those volumes cannot simply reverse course without massive detours. Oil could theoretically move north through Suez into the Mediterranean and then all the way around Africa via the Cape of Good Hope to reach Asia—an extremely long and costly path. Pipeline expansions or interconnects (potentially involving neighbors) could theoretically shift more crude toward Mediterranean outlets, but capacity is constrained and would require significant time, investment, and diplomatic coordination.
• Cape of Good Hope reroute: The default alternative when Red Sea transit is disrupted. For a typical voyage from the Persian Gulf/Red Sea region to Northwest Europe (Amsterdam-Rotterdam-Antwerp hub), the Suez/Red Sea route takes roughly 19 days; the Cape route stretches to nearly 35 days—an added 14–16 days. Asia-Europe voyages via Cape commonly add 10–14 days (or more, depending on origin/destination) and increase distance by thousands of nautical miles.

Extra pipelines and tanker logistics: Blas highlights the need for one or two additional pipelines plus heavy tanker use. This could involve ship-to-ship (STS) transfers in safer waters, expanded use of existing or new land lines to alternative terminals, or creative routing that keeps vessels farther from Houthi range. Saudi Arabia has explored capacity expansions on the East-West system (potentially adding up to 1–2 million bpd in talks with neighbors), but physical limits at Yanbu terminals (tested around 3–4.5 million bpd under stress) and the need for secure loading remain constraints.

The Added Costs Per Tanker

These alternatives are feasible but expensive. Historical and recent data from the Red Sea crisis periods provide clear benchmarks:

• Time: +10 to 16+ days per voyage (or more for complex Asia routings via Mediterranean then Cape). This ties up vessels longer, reduces effective fleet capacity, and raises charter rates.
• Fuel: A large tanker or VLGC can consume fuel worth $30,000–$35,000 per day (at recent bunker prices). Extra days therefore add hundreds of thousands of dollars. Documented incremental costs for Aframax or similar tankers diverting Asia–Northwest Europe via the Cape have approached or exceeded $900,000–$1 million per voyage, driven primarily by extra fuel. Fuel burn can rise ~30% on the longer path. Overall extra fuel for the industry from widespread Cape diversions has previously been estimated in the hundreds of thousands of barrels per day.

Transfer, insurance, and other costs: Pipeline loading/unloading or STS transfers add handling fees (often in the range of tens of cents to over $1 per barrel depending on scale and location, though exact current figures vary). War-risk insurance premiums for Red Sea transit have spiked dramatically in past crises (sometimes hundreds of thousands of dollars per voyage when available at all). Crew costs, vessel wear, and opportunity costs from delayed cargoes compound the total. For container ships, the Cape premium has been cited around $200–400 per TEU or $2–4 million per voyage in some analyses; crude tankers face analogous (if differently structured) uplifts. Canal tolls are avoided on the Cape route, but fuel and time usually more than offset the savings.

In short, Saudi oil can still reach markets, but each diverted or multi-stage cargo carries meaningfully higher delivered costs that ultimately flow through to refiners, consumers, and global prices.

Reports of Saudi Action Against the Houthis

On X (formerly Twitter), multiple accounts in recent days have claimed Saudi Arabia is “preparing to finish off the Houthis,” citing reinforcements of coalition forces moving toward Marib, Al-Jawf, areas near Hodeida, and Sanaa. Some posts reference video of convoys and assert coordination with allies for a larger operation.

These specific claims of an imminent major ground offensive remain unverified by major international news organizations or official Saudi statements as of July 26, 2026. What is confirmed: the Houthis have attacked Saudi oil tankers in the Red Sea and claimed strikes on facilities (including reports of fires at Jizan); Saudi Arabia and the Saudi-led coalition have responded with airstrikes on Houthi-held Hodeida and other targets. Escalation is real and reciprocal. Regional sources cited in some reporting indicate Saudi green-lighting of longer operations involving air power and Yemeni government forces after coordination with allies, but a full-scale “finish off” campaign is not yet independently corroborated at scale.

If Saudi Arabia deepens its military involvement significantly—beyond the current strikes—the picture darkens. It risks intensified Houthi retaliation against Saudi oil infrastructure and shipping, further closure risks at Bab el-Mandeb, broader proxy escalation tied to the U.S.-Iran conflict, higher regional insurance and risk premiums, and potential draw-in of additional actors. Saudi oil facilities have already shown vulnerability; a wider war could constrain the very export routes (and the East-West pipeline’s utility) that currently provide relief.

The following post on X appears to be legitimate.

What Oil Analysts Are Saying About Prices and the Four Chokepoints

Markets are already pricing elevated risk. Brent crude has recently traded in the mid-to-high $90s per barrel (around $96–98 in late July data, after earlier spikes above $100 amid Hormuz tensions), with WTI similarly elevated from pre-conflict levels. Analysts highlight a rare simultaneous threat to multiple chokepoints: the Strait of Hormuz (Iran-related disruptions and residual risks), Bab el-Mandeb (Houthi activity), the Red Sea/Suez corridor (directly affected), and the knock-on effects that effectively put a fourth major route (longer Cape diversions) under strain as the default alternative.

Priyanka Sachdeva (Phillip Nova) noted the “rare risk from simultaneous disruptions at both the Bab el-Mandeb and the Strait of Hormuz.” Saul Kavonic (MST Marquee) warned the new Red Sea threat could interrupt up to 5 million bpd—the main Hormuz-bypass route for Gulf oil. Matt Smith (Kpler) has emphasized that Houthi action at Bab el-Mandeb would hit Saudi barrels heading to Asia particularly hard and represent a step-up in market impact. Broader commentary from the IEA and others earlier in the conflict described supply shocks of historic scale when Hormuz flows were heavily constrained, with pipelines only partially offsetting losses. Sustained or widened disruptions would support higher geopolitical premiums; a prolonged multi-chokepoint squeeze could push prices significantly higher until alternative logistics scale up or diplomacy eases tensions.

Saudi oil can still move today—thanks to the East-West pipeline, residual Red Sea sailings under heightened security, Suez options, and Cape reroutes. But every alternative layer adds time, fuel, transfer complexity, insurance, and risk. The cost is already visible in freight rates, voyage economics, and the oil price. Further escalation with the Houthis would raise that cost still higher for producers, shippers, and the global economy.

This brings up the added debate on when paper oil prices will meet physical delivery prices. That premium is about $70 today, so oil delivered is between $140 and $200 per barrel. This is adding to the costs to consumers. Having 5.1 million barrels sold short the other day tends to hold the oil price down and does beg the question, “Are prices being manipulated?”

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