Key facts
- The Houthis claimed responsibility for a missile attack on the Saudi oil tanker NCC Wafaa off the coast of Yanbu.
- This incident represents the northernmost attack by the Houthi group since its blockade on Saudi Arabia began.
- The attack threatens Saudi Arabia's key oil export routes, including the Red Sea and potentially the Suez Canal.
- Saudi Arabia had previously rerouted oil to Yanbu due to disruptions in the Strait of Hormuz.
- The Houthi blockade and subsequent drone strikes in Egypt are limiting Saudi Arabia's options for oil export.
The Houthis announced on Wednesday that they had fired ballistic missiles at the NCC Wafaa, a Saudi oil tanker, off the coast of Yanbu. This marks the northernmost attack by the Yemeni group since it initiated a blockade on Saudi Arabia. Analysts warn that a shift northwards towards Egypt and the Suez Canal could exert increasing economic pressure on the Gulf kingdom.
Previously, Houthi attacks primarily targeted ships off Yemen's coast in the southern Red Sea and Gulf of Aden. The group accused the Wafaa of violating the blockade and ignoring warnings before the strike. Saudi Arabia has increasingly utilized the Bab al-Mandab strait as an alternative oil route, especially after Iran effectively paralyzed vessel traffic via the Strait of Hormuz in early March. This led Saudi Arabia to shift its onshore Arab Light volumes from the Persian Gulf to the 7 million barrels per day Petroline to the port of Yanbu on its western shores.
Yanbu's oil exports surged to about 2.47 million bpd in March, a massive 330% increase compared with pre-war levels. By April, Saudi Arabia was shipping over 4 million barrels daily from Yanbu. However, by June, Yanbu loadings had fallen to around 2.39 million barrels daily, down by 41% from the March peak and a 66% slump from the total Saudi export level in January. This decline may have been partly due to a temporary resumption of Hormuz traffic in late June, though that deal fell through and missile strikes resumed.
Meanwhile, the maritime intelligence firm Windward reported crude loadings in progress at Yanbu, with 12 vessels at the port. From Yanbu, Saudi vessels are now sailing north to avoid the Houthi blockade. This leaves Saudi Arabia with the Suez Canal and the SUMED pipeline to Egypt’s Mediterranean coast as its primary maritime route out of the Middle East. The SUMED pipeline has a capacity of 2.5 million barrels daily, suggesting it would be physically impossible for Saudi Arabia to shift all of its oil flows previously handled by the East-West pipeline and Yanbu to that conduit. However, it could reportedly reroute half of them to SUMED. Windward noted at least three Saudi very large crude carriers moving crude oil from Yanbu to the Egyptian port of Ain Sukhna, where it would be fed into SUMED.
Practically, it would be hard for Saudi Arabia to maintain previous oil export volumes via Suez, as the SUMED pipeline only has a capacity of 2.5 million barrels daily, and other countries have reserved some of that capacity. The Suez Canal can also only handle about 1 million barrels daily. This suggests Saudi oil flows would shrink in the coming weeks unless the Yemeni Houthis lift their blockade. With lower Saudi volumes going out, other producers would need to step up. Traffic via the Strait of Hormuz appears to be picking up moderately, with tanker crossings still in single digits but higher than earlier. Some 13 million barrels daily was coming out of the Persian Gulf, which is 65% of pre-war levels.
Saudi Arabia is benefiting from higher prices, as Brent crude has gained 47% since the start of the year. The country’s budget deficit has slimmed down considerably, and oil revenues were up by 28% from the first quarter of the year, despite a decrease in oil production. However, geographical vulnerabilities remain a significant challenge.