Saudi Arabia’s oil exports increasingly rely on the Suez Canal 

Saudi Arabia's oil exports are becoming increasingly dependent on the Suez Canal as attacks in the Red Sea threaten a key alternative to the blocked Strait of Hormuz, The Wall Street Journal reported.

The kingdom has significantly increased shipments from its western coast since the conflict with Iran disrupted traffic through Hormuz. Crude transported across Saudi Arabia via the East-West Pipeline can be exported from Red Sea terminals without transiting the strait.

Much of that oil has been sailing south through the Bab al-Mandeb Strait before heading to customers in Asia. However, recent Houthi attacks on Saudi-linked vessels have made the route increasingly risky, prompting some tankers to turn around before reaching Bab al-Mandeb and instead head north toward Egypt.

At least four tankers carrying Saudi crude changed course this week before reaching Bab al-Mandeb, according to vessel-tracking data. Saudi Arabia has also begun offering more cargoes from Egypt's Mediterranean ports.

Oil transit through the Suez Canal reached its highest level in two and a half years during the first three weeks of July. Flows into Egypt's Sumed Pipeline, which links the Red Sea with the Mediterranean, rose 50% compared with June.

Saudi shipments from Red Sea terminals have climbed to around 4.9 million barrels per day since the conflict began, up from between 700,000 and 1 million bpd previously. Roughly 3.5 million bpd have been moving through Bab al-Mandeb, primarily bound for Asia.

Redirecting those barrels through Suez creates logistical challenges. Fully laden Very Large Crude Carriers (VLCCs), which can carry around 2 million barrels of oil, have too much draft to transit the canal.

Operators can offload part of the cargo into the Sumed Pipeline before entering the Suez Canal, transfer it to smaller vessels, or reroute ships around Africa. The longer diversion could add between 20 and 30 days to voyages bound for Asia, increasing freight costs and war-risk insurance premiums.

Diesel and jet fuel markets could face additional pressure, as product tankers rely more heavily on the Suez Canal than the large crude carriers typically used for long-haul oil exports.