Saudi Aramco, the world’s largest oil exporter, has resorted to issuing rare spot tenders for crude oil amid escalating geopolitical tensions in the Middle East.
Traders report that the company offered more than 4 million barrels through multiple tenders in recent days. This unusual move comes as the ongoing U.S.-Iran conflict severely disrupts traditional export routes.
Geopolitical Tensions and Route Disruptions
The conflict has led to the virtual closure of the Strait of Hormuz, a critical chokepoint through which about one-fifth of global oil and liquefied natural gas normally flows. Fears of attacks have halted or slowed tanker traffic, forcing exporters like Saudi Arabia to reroute shipments via the Red Sea ports, such as Yanbu.
Producers including Iraq and Kuwait have begun reducing output due to these blockages. Asian refiners, who source around 60% of their oil from the Middle East, face immediate supply shortages, leading to potential production cuts.
Aramco’s Tender Details and Market Response
In one tender closing on Monday, Aramco offered 2 million barrels of Arab Heavy crude for loading at Egypt’s Ain Sokhna port between March 10-30, destined for Asia on an FOB basis. Another involved 650,000 barrels of Arab Light on a CFR basis from Yanbu.
A third tender resulted in the sale of 2 million barrels of Arab Extra Light to Japan’s Idemitsu Kosan, with the cargo already near Taiwan. These sales occurred at premiums to Saudi Arabia’s March official selling prices.
This spot market activity highlights supply constraints and efforts to maintain flows despite regional instability. Oil prices have surged, reflecting broader market concerns over prolonged disruptions.