Saudi Arabia Weighs $5 Asia Price Hike as Two-Choke-Point Squeeze Tightens
Rerouting costs of up to $10 million per cargo are pushing Saudi Aramco toward higher Asian crude official selling prices as Houthi and Hormuz disruptions compound.
Saudi Arabia is considering raising official selling prices for crude shipped to Asia via the Suez Canal by up to $5 per barrel, Reuters reported on Monday (2026-07-28), a direct response to surging freight costs after Houthi rebels imposed a maritime blockade on Saudi exports through the Bab el-Mandeb Strait.8
Rerouting around Africa, the alternative for tankers avoiding the Red Sea, can add as much as $10 million per cargo, according to one Reuters source familiar with the calculations. That cost does not disappear — it gets priced into differentials, lifted by buyers, or absorbed by state sellers with enough market power to push it upstream. Aramco is signaling it intends to do the latter.8
ICE Brent crude front-month settled above $100 on Thursday (2026-07-23) for the first time in nearly two months, rising more than 6% after the Houthis said they had struck two Saudi oil tankers, according to rte.ie. As of Tuesday (2026-07-29), ICE Brent front-month was trading at $90.15 per barrel — a pullback from those highs, but still up sharply on the month, with roughly 90% of June's losses recovered, per FX Empire data.7,5
The escalation has compounded what Standard Chartered Bank energy research head Emily Ashford, in a note sent to Rigzone on Wednesday (2026-07-22), called a "two choke-point problem." The Strait of Hormuz has been operating well below normal since Iran moved to restrict access more than three months ago. HSBC senior global oil and gas analyst Kim Fustier reported that Hormuz crossings had fallen back toward April-May lows, with several days registering single-digit vessel transits — down 90% from normal. At those transit rates, Fustier estimated Hormuz liquids flows at less than two million barrels per day.6
Bab el-Mandeb now layers additional risk onto a system already under strain. In the week ending July 17 (2026-07-17), Saudi Arabia had been exporting at record pace from its Red Sea terminals, shipping 5.9 million barrels per day from the two Yanbu terminals, according to tanker tracking data cited by Rigzone. On Tuesday (2026-07-21), the Greek-owned Suezmax Amazon, which departed Yanbu carrying more than one million barrels of crude, altered course and redirected through the Suez Canal instead.3
The bypass infrastructure cannot absorb the volume. Saudi Aramco's East-West pipeline — the land route connecting the Arabian Gulf to Yanbu — reached its maximum capacity of 7 million barrels per day, Aramco confirmed in first-quarter earnings. Fustier warned that combined existing and under-construction bypass pipeline capacity across the region reaches up to 11 million barrels per day against normal Hormuz flows of 19 to 20 million barrels per day, a gap alternative infrastructure cannot close.6,1
A MarineTraffic analyst said on Wednesday (2026-07-22) that the "Bab el-Mandeb risk picture is deteriorating," with vessels continuing to turn back from the strait's southern approaches after the Houthi embargo announcement. Ships choosing to reroute around the Cape of Good Hope face longer transit times and higher fuel burn. Supertankers cannot transit the Suez Canal at all due to draft constraints, which further limits efficient routing options.4,1
Dubai crude, the benchmark for Middle East sour grades, sat at $76.91 per barrel as of Tuesday (2026-07-29), a substantial discount to ICE Brent front-month at $90.15. Storage economics appear to be applying downward pressure on the regional marker even as choke-point disruptions push Brent higher — a divergence that complicates the bullish thesis for anyone pricing Asian crude import economics rather than Atlantic basin benchmarks.7
China's stockpile position adds uncertainty. Since the Hormuz restrictions began more than three months ago, China has drawn on a stockpile of more than 1.2 billion barrels, according to June reporting, which has so far buffered prompt tightness from Persian Gulf disruptions. How much longer that buffer lasts is now a central supply question for Asian markets.1
Analysts have put $120 on ICE Brent front-month as a plausible target under a full Bab el-Mandeb closure scenario. Goldman Sachs expects prices to retain most of their recent gains through July and August, supported by lower Middle East output and seasonal demand, Montel reported. Those projections assume the current partial disruption does not escalate further. Whether Saudi Arabia formally announces the Asian pricing adjustment — and how major Asian refiners respond to absorbing rerouting costs passed through official selling prices — will be the first concrete test of how much of that freight burden the kingdom can transfer upstream.2,7,8