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Red Sea and Bab al-Mandab risks force longer, riskier oil routes
Societe Generale says total Red Sea oil flows have fallen by 4 mb/d since July 1, driven by a 3.7 mb/d drop in Bab al-Mandab traffic.
Societe Generale analysts Michael Haigh and Jeremy Sellem say security risks tied to the Red Sea and the Bab al-Mandab are pushing oil cargoes onto longer, more complex routes, with delivery safety becoming the dominant challenge rather than production.
The analysts point to sharply reduced Red Sea flows, citing a 4 mb/d decline since July 1, including a 3.7 mb/d drop in Bab al-Mandab traffic. They add that Houthis appear to be targeting Saudi-flagged vessels, while Chinese-flagged tankers carrying Saudi crude have continued to transit Bab al-Mandab based on tanker behavior and confirmed incidents.
Societe Generale describes how Saudi crude is diverted first through Saudi Arabia's East-West Pipeline to Yanbu, then loaded onto VLCCs, transferred into Egypt's SUMED pipeline, and reloaded for shipment that routes around the Cape of Good Hope. To avoid missile and drone threats near Bab al-Mandab and the Gulf of Aden, vessels are also continuing across the Indian Ocean and through the Strait of Malacca.
The analysts also cite other disruption risks, including disruptions to CPC exports in Kazakhstan, elevated refinery outages in Russia, and recurring attacks on shipping infrastructure, arguing the market remains exposed to further setbacks as hazards shift from one leg of the journey to the next.
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