The Red Sea Is Becoming Saudi Arabia's Biggest Oil Bottleneck
By Cyril Widdershoven - Jul 24, 2026, 2:00 PM CDT
- Saudi Arabia's East-West Pipeline bypasses Hormuz, but a closure of Bab el-Mandeb leaves Yanbu exports facing severe logistical constraints, with the Suez Canal unable to fully replace the Red Sea route.
- The Suez Canal and Egypt's SUMED pipeline lack the capacity to handle a sustained diversion of millions of barrels per day, creating bottlenecks, longer transit times and higher shipping costs.
- A prolonged Bab el-Mandeb disruption would tighten tanker availability, delay crude and fuel deliveries to Asia.
For years, Saudi Arabia's strategic answer to any disruption in the Strait of Hormuz has been remarkably straightforward. If volumes via the Persian Gulf were threatened, the answer was to pump west through the East-West Pipeline to Yanbu on the Red Sea. Markets have always seen this as reassuring, while strengthening Saudi energy security and reducing dependence on Hormuz. Current developments in the Red Sea, especially Bab El Mandab, however, have exposed a critical weakness in that assumption. The East-West Pipeline is not solving the total problem, as once crude reaches Yanbu, it still has to leave the Red Sea. The Bab El Mandab is now, however, inaccessible due to a sustained Houthi blockade. The Kingdom now faces a logistical challenge with significant geopolitical implications, as a closure could disrupt global oil markets and shift strategic power balances.
There is, of course, still the simple proposition that tankers could instead sail north through the Suez Canal. Yes, at first glance an elegant option, as the Suez Canal continues to operate, and Egypt also controls the SUMED pipeline. Reality is, however, more complicated. First of all, the Suez route was never designed to replace unrestricted access through Bab el-Mandab for several million barrels per day of Saudi crude, refined products, and petrochemical exports. Yes, it can absorb additional traffic, but not without creating new bottlenecks, longer transit times and significantly higher costs for global energy markets. Related: ADNOC Issues Seventh Crude Tender Since June Despite Hormuz, Red Sea Risks
With Saudi Arabia's East-West Pipeline’s nameplate capacity of around seven million barrels per day, crude will reach Yanbu on the Red Sea. Even though a substantial part of this volume feeds domestic refineries and petrochemical facilities in western Saudi Arabia, the rest will need to be exported. Since the Iran war and the Hormuz crisis, Yanbu has rapidly evolved into the Kingdom's principal export outlet. This gives the Kingdom strategic flexibility, as it allows exports to continue while reducing exposure to Iranian threats in the Gulf. However, the current vulnerabilities highlight the need for policymakers and strategic planners to reassess alternative routes, diversify export infrastructure, and develop contingency plans to mitigate potential disruptions.
If, however, the Bab El Mandab is closed or threatened, that advantage disappears. Every cargo loaded at Yanbu must now make a fundamental choice. Cargoes to Europe or the USA can go through the Suez Canal without major complications. For Asia volumes, where the overwhelming majority of Saudi crude is consumed. They must first travel north through the entire Red Sea before reaching the Suez Canal. Afterward, they still need to cross into the Mediterranean and then undertake the much longer voyage around the Cape of Good Hope before eventually returning east toward Asia. Asian bound-volumes will now face one of the longest energy transport routes.
At the same time, there is another challenge immediately. It is linked to the physical limitations of the Suez Canal itself. Saudi crude exports rely on VLCCs, each capable of transporting around two million barrels of crude oil. For long distances, VLCCs provide the lowest transportation costs. They also have become the backbone of Saudi export logistics. However, a fully loaded VLCC cannot transit the Suez Canal because of draft restrictions. Although the canal has undergone repeated expansions over the past decade, the canal still cannot accommodate these vessels at full cargo capacity.
Until now, the only solution is Egypt's SUMED pipeline, which runs from Ain Sokhna on the Red Sea to Sidi Kerir on the Mediterranean. This twin pipeline allows crude to be unloaded from VLCCs before canal transit and then reloaded after reaching the Mediterranean. Normally, this runs very efficiently. The difficulty is not whether SUMED functions; the difficulty is whether it possesses sufficient capacity to absorb a sudden and sustained diversion of several million barrels per day from Yanbu. The answer is NO.
SUMED's effective throughput is slated to be 2.3 to 2.5 million bpd, more than adequate to serve existing commercial flows. At present, however, it falls well short of accommodating the potential export volumes that could be redirected if Bab el-Mandeb became unavailable. Looking at Yanbu volumes, the Kingdom would require almost twice that capacity. SUMED also has existing pipeline commitments, commercial cargoes from other regional producers, and routine operational maintenance. Taking all this into account, it is evident that SUMED rapidly transforms from a strategic solution into another strategic bottleneck.
The first consequences will be seen in Ain Sokhna, as every additional VLCC requiring partial discharge before canal transit would occupy berth space, storage facilities, pumping systems, and loading equipment for longer periods. Congestion and demurrage will be a reality. The same will happen in Sidi Kerir, where crude would need to be reloaded. Each transfer operation introduces additional complexity into what was previously a direct export chain. Hours become days, and days quickly become weeks as queues begin to form.
The Suez Canal itself will also be a constraint, as it remains one of the busiest maritime corridors in the world, carrying container ships, LNG carriers, bulk vessels, cruise ships, naval traffic, and oil tankers in carefully managed convoys. Even after the expansion, the Suez Canal operates within practical limits, as every vessel requires pilots, tug support where necessary, traffic management and scheduled convoy slots.
Congestion will be inevitable if several dozen extra crude carriers and product tankers begin entering the canal every week, with longer transit schedules, filled anchorage areas and additional waiting times. For sure, knowing Egypt and the Suez Canal, security procedures are also likely to become more stringent, adding further delays. The overall efficiency of the route will be reduced significantly.
For refined petroleum products, the situation is hardly less challenging. Saudi Arabia exports large volumes of diesel, gasoline, jet fuel, naphtha, fuel oil, and liquefied petroleum gas from Yanbu. These products are generally transported by Medium Range and Long Range product tankers, which can transit the Suez Canal without relying on SUMED. However, these extra vessels will compete for canal slots, pilot availability, terminal access, and anchorage capacity alongside crude carriers.
The global impact will be severe and fast, especially for refined products. As refineries and fuel distributors generally operate with smaller storage buffers than upstream crude producers, any delay will disrupt delivery schedules, tighten regional inventories, and increase wholesale prices. The latter will be much faster than comparable interruptions in crude supply.
For Asian buyers, a closure of Bab El Mandab and a Suez route is significant. China, India, Japan, and South Korea collectively account for the overwhelming majority of Saudi crude exports. To reroute through Suez before eventually sailing around the Cape of Good Hope would add thousands of nautical miles to each voyage. Transit times could hit six or even seven weeks, instead of three weeks. Each additional week at sea translates directly into higher bunker consumption, higher costs and significantly higher working capital requirements for both exporters and importers.
It also results in an often-overlooked structural problem for the global tanker market. Longer distances will result in vessels effectively disappearing from the available fleet for that additional period. In reality, no ships are actually lost, but the industry's effective transport capacity declines sharply. This tightening tanker market extends beyond Saudi exports, as VLCCs diverted onto longer routes reduce vessel availability for Gulf producers. At the same time, it will also effectively increase demand for Suezmax and Aframax tankers. We will especially see this with vessels serving Mediterranean and European trades.
The cumulative effect of these operational constraints is far greater than the sum of their individual parts. They fundamentally reduce the flexibility and efficiency upon which modern oil markets depend. Again, energy security is increasingly determined not only by production capacity but by logistical resilience. In recent years, enormous investments have been made in expanding oil production, constructing pipelines and developing export terminals. Now, the lack of interest in resilience of the maritime corridors connecting all is hitting.
All of this, especially for energy markets, represents a fundamental shift in thinking. The world's focus has traditionally been on production losses measured in barrels per day. The future will be decided by barrels that can actually reach customers on time.
Yes, Saudi Arabia's East-West Pipeline remains an extraordinary strategic asset. However, it cannot overcome maritime geography. Without secure access through Bab el-Mandab, the Suez Canal and the SUMED pipeline become critical fallback options. They are not complete solutions. The next major energy crisis may not be determined by how much oil Saudi Arabia can produce, but by how efficiently that oil can leave the Red Sea and reach the markets that depend upon it. At present, oil and product prices are feeling the geography impact, with no upper limits set.
By Cyril Widdershoven for Oilprice.com
