Saudi Arabia is discussing with its customers loading oil in 2027 from outside the Strait of Hormuz

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Saudi Arabia is holding talks with its customers to include a mechanism for delivering oil shipments outside the Strait of Hormuz in long-term contracts for next year, in a move that may consolidate a system that the Kingdom adopted during the current war with the aim of maintaining supply flows and enhancing its competitiveness in the markets.

According to sources who spoke to Bloomberg, discussions have continued with buyers and will be resolved before the end of the year. If the amendments are approved, they will represent an important shift in the way Saudi crude is exported, as long-term contracts constitute the largest portion of the Kingdom’s oil sales.

The war, which has been ongoing for eight months, has led to widespread disruption in traditional oil shipping routes, with a decline in the efficiency of passage through the Strait of Hormuz. This prompted major Gulf exporters to adopt alternative arrangements to maintain customer supplies, including a “transshipment” system in which the seller assumes the risks of passing through the strait before transferring shipments to other carriers outside it.

Saudi Aramco also discussed additional modifications, including giving customers wider choices in pricing indicators, and even the possibility of delivering shipments directly to buyers in Asia, according to the sources. No final decisions have been made yet, while pricing details, shipping costs, and quantities included are still under negotiation.

Before the outbreak of the war, Aramco relied on its Asian clients to rent tankers and collect shipments from the port of Ras Tanura inside the Gulf, while the company did not usually undertake maritime transportation arrangements.

However, the reluctance of some shipowners to cross the Strait of Hormuz since the start of the conflict has made it difficult for buyers to secure tankers at reasonable prices, despite the availability of crude. This prompted Gulf countries, including Saudi Arabia, the UAE, Kuwait and Iraq, to ​​use ship-to-ship transfers outside the strait to ensure continued supplies.

Aramco used this mechanism to supply its main export raw materials, which are Arab Light, Arab Medium, and Arab Heavy, according to the sources.

Aramco also expanded delivery options by allowing some buyers to carry out shipment transfers between ships off the Indian coast, which provided a safer alternative for customers who face security restrictions that prevent them from heading to the Gulf of Oman, and also contributed to reducing congestion near the ports of the Arabian Peninsula.

Aramco also considered arrangements that would allow it to take over a larger portion of shipping operations and deliver the crude directly to customers. Besides supporting export flows, this may give the company an opportunity to benefit from the sharp rise in tanker fares associated with crossing the Strait of Hormuz.

Some Asian customers also discussed with Aramco the possibility of pricing their long-term purchases based on Brent crude futures contracts instead of the standard Dubai and Oman crude oils, in a move that reflects greater flexibility from the world’s largest oil exporter in meeting buyers’ requirements.