Saudi Red Sea export costs triple as war-risk insurance nears Hormuz levels
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War-risk insurance premiums for Saudi-linked tankers calling at the Red Sea port of Yanbu have tripled to about 3% of vessel value from under 1% in early July, according to Reuters. The surge adds millions of dollars to each cargo and pushes Saudi Arabia back toward the Persian Gulf route through the Strait of Hormuz, where premiums run 6-9%. The shift follows drone attacks that shut the East-West pipeline earlier this month and left Yanbu crude loadings suspended as of Thursday.
Key Facts
- War-risk insurance premiums for Saudi-linked tankers at Yanbu have tripled to about 3% of vessel value from under 1% in early July, according to Reuters.
- Premiums at Saudi ports farther south, including Jizan, can reach 7%, while Hormuz voyages run between 6% and 9%.
- A voyage from Yanbu can carry roughly $3 million in war-risk insurance, and the bill can reach $7 million from ports farther south or through Hormuz, compared with at least $100,000 before the war.
- Drone attacks shut the East-West pipeline earlier this month, and Aramco restarted it at reduced rates, but Yanbu crude loadings had still not resumed as of Thursday.
- Aramco sold roughly 60 million barrels for September and October loading from Ras Tanura, with crude moving through Hormuz for ship-to-ship transfers near Sohar.
Insurance Cost Surge
Quoted premiums for Saudi-linked tankers calling at the Red Sea port of Yanbu have tripled to around 3% of a vessel's value from less than 1% in early July, according to Reuters. At Saudi ports farther south, including Jizan, quoted premiums can reach 7%, while Hormuz voyages are running between 6% and 9%. A voyage from Yanbu can carry roughly $3 million in war-risk insurance, and the bill can reach $7 million from ports farther south or through Hormuz, compared with at least $100,000 before the war. Charter rates are running at least $500,000 per day, with bunker fuel adding another $100,000 or more.
Pipeline Disruption and Export Shift
Saudi Arabia spent billions building the East-West pipeline specifically to avoid relying on Hormuz, and the line had been moving roughly 4 million barrels per day across the kingdom to Yanbu after Iranian restrictions slashed traffic through the strait. Drone attacks shut the pipeline earlier this month, and Aramco has since restarted it at reduced rates, although Yanbu crude loadings had still not resumed as of Thursday, despite previous reports that loadings had been scheduled. The outage pushed Saudi Arabia back toward the Persian Gulf, with Aramco selling roughly 60 million barrels for September and October loading from Ras Tanura, with crude moving through Hormuz for ship-to-ship transfers near Sohar. Asian buyers took much of that oil, while some European term customers were told they would receive no Saudi crude in October.
Chokepoint Risk Comparison
The Red Sea route has its own problem: the Houthis have threatened Saudi-linked vessels around Bab el-Mandeb. Shipping companies see a practical difference between the two chokepoints, with U.S. forces providing some aerial support around Hormuz in recent months, according to Reuters sources, while no comparable U.S. protection is operating in the Red Sea. Saudi Arabia now has two export routes carrying two different versions of the same problem: expensive ships, expensive insurance, and a lot less certainty about getting the barrel where it needs to go.
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