US-Iran war: Saudi Aramco finds new way to supply oil
What's the story
Saudi Aramco, the world's largest crude exporter, has started offering prompt crude supply via a series of rare tenders. The move comes as the effective closure of the Strait of Hormuz has trapped shipments and forced a rerouting via the Red Sea. The company has offered three grades - Arab Extra Light, Arab Heavy and its flagship Arab Light.
Supply strategy
Spot market tenders reflect a stressed market
The spot market tenders indicate a stressed market as Saudi Arabia cannot sell most of its oil through conventional channels. The kingdom is now diverting unprecedented amounts of crude via a pipeline to Yanbu on the Red Sea. Ship-tracking data shows that shipments from its western terminals have surged to about 2.3 million barrels per day this month, nearly 50% more than any month since late 2016.
Pricing strategy
Tenders offered at a premium over respective grades' OSPs
The tenders offered by Aramco were at a premium over the respective grades' official selling prices (OSPs) for March. These prices were set around a month ago, long before the current war in the Middle East between US-Israel and Iran began. This pricing strategy may reflect attempts to address market disruptions.