TD Securities’ Senior Commodity Strategist Ryan McKay analyzes how disruptions around the Strait of Hormuz and Bab El-Mandeb are reshaping Saudi crude export risks and bypass capacity, with implications for Oil supply tightness. The report details flows via Yanbu, Very Large Crude Carrier (VLCC) routing, Suez Canal and SUMED pipeline constraints, and potential exposure of Saudi barrels to Houthi attacks.

Saudi bypass flows and Houthi disruption risk

"Up to 16-17m b/d of crude flow through the Strait of Hormuz has been halted. Roughly 7m b/d of those flows are able to bypass the Strait. Saudi Arabia has approximately 5-5.5m b/d of spare capacity compared to pre-war levels available on the East-West pipeline to export crude via the Red Sea."

"The Saudi East-West pipeline is seemingly running at full capacity and the Yanbu ports are showing 13m b/d of scheduled crude loadings for export this week and over 5m b/d next week."

"Based on current schedules at least roughly 70-75% of Yanbu exports could face disruption risk if the Red Sea sees Houthi interference. Of the Yanbu exports, 90% are set to be loaded on VLCCs, and at least 80% of that is likely heading to Asian markets or the Saudi Jazan refinery further down the West Coast. When fully laden, VLCCs cannot transit the Suez Canal, suggesting these flows will need to transit through the Bab el-Mandeb Strait."

"Up to 2-2.5m b/d of scheduled VLCC flows could avoid the Houthi threats by heading North. Given the recent surge in Egyptian imports of Saudi crude, we anticipate as much as 2-2.5m b/d worth of the scheduled VLCC loadings could go to the port of Ain Sukhna, which uses the 2.5-2.8m capacity SUMED pipeline to move oil to the Sidi Kerir terminal on the Med Sea where it is then exported elsewhere. This path would likely avoid Houthi risks, but just over 2m b/d seems to be the upper limit for this avenue."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)