A Chinese oil tanker, the "Xin Long Yang," carrying two million barrels of Saudi crude was forced to make an emergency U-turn due to a blockade in the Red Sea's Bab el-Mandeb Strait, rerouting around the Cape of Good Hope. This has extended the journey from 7,000 miles to 17,000 miles, adding 10,000 miles and four weeks of travel time. Meanwhile, at least two Chinese refineries have suspended receipt of Saudi crude for August, with some facing supply risks as Brent crude oil prices have surged past $90 per barrel, transmitting costs to the domestic market. This dual-strait blockade is making every barrel of crude oil that detours around Africa a painful reality for China's refining industry and foreign trade sector.
Key Maritime Oil Routes Blocked
With the simultaneous disruption of the Strait of Hormuz and the Bab el-Mandeb Strait, a bizarre scenario is unfolding in global energy and shipping history: Asian refiners are seeking to transport Saudi oil via the Suez Canal. According to industry sources, after the Houthi group in Yemen announced a maritime blockade on Saudi Arabia this week, Asian refiners are exploring new routes, planning to ship crude from Saudi Red Sea ports through the Suez Canal and around Africa to Asia. Over the past few months, conflicts between the US, Israel, and Iran have significantly reduced oil supply, forcing Asian refiners to seek alternative crude or change routes. This latest shift in shipping lanes marks another severe disruption in global oil flows. On Tuesday, two tankers carrying Saudi crude destined for Asia turned back after facing threats from the Houthis in the Red Sea, while the number of vessels transiting the Strait of Hormuz earlier this week further decreased. Analysts and industry experts warn that compared to the usual route from Saudi Arabia's Yanbu port eastward to the Arabian Sea, the alternative route west to Egypt, through the Suez Canal, and around the Cape of Good Hope will add up to four weeks of travel time, further driving up freight and fuel costs.
Tankers from Asia Take a Detour 'Around Africa' to Reach Asia
Latest vessel tracking data from LSEG and Kpler released on Tuesday shows that the Liberian-flagged tanker Rodos, which had loaded crude at Yanbu and was originally headed for the west coast of India, has turned westward and is preparing to enter the Suez Canal. A shipping source revealed that South Korean refiner Hyundai Oilbank was also seeking a Very Large Crude Carrier (VLCC) on Tuesday to load crude at Yanbu, keeping open the option of shipping the oil to South Korea via the Suez Canal and the Egyptian SUMED pipeline (which connects the Red Sea to the Mediterranean). Notably, due to draft restrictions, fully loaded VLCCs cannot directly pass through the Suez Canal. Therefore, cargo owners typically offload some crude oil for transfer via the SUMED pipeline on the Red Sea side to lighten the vessel before entering the canal. After the ship passes through the Suez Canal with a lighter load, the crude is reloaded on the Mediterranean side. The shipping source said charterers are currently assessing their options, deciding whether to use the SUMED pipeline or the Suez Canal detour. If the Bab el-Mandeb Strait, the southern gateway to the Red Sea, is fully blocked, parties will then calculate the costs of rerouting. Historically, the Suez Canal and SUMED pipeline have been used to transport goods from the Red Sea to Europe. "The change in tanker navigation patterns indicates that the industry is taking these threats seriously," said Matt Smith, Director of Commodity Research at Kpler. He added that the Houthi disruption is a double blow for Saudi Arabia, which last month saw record crude and petroleum product shipments through the Bab el-Mandeb Strait, exceeding 4 million barrels per day. The Houthis, who control northern and western Yemen, including the Red Sea coastline, announced a maritime blockade on Saudi Arabia on Monday. In a letter to cargo owners, the Houthis threatened to attack any vessel loading or unloading Saudi oil.
Chinese Tanker Forced to Turn Back
The immediate impact of the Houthi ban has hit China directly. On July 20, the Houthis announced a maritime blockade on Saudi Arabia. Just one day later, the ultra-large crude carrier "Xin Long Yang," laden with about 2 million barrels of Saudi crude and originally destined for China, made an emergency U-turn in the southern Red Sea. Managed by COSCO Shipping, the tanker abandoned its attempt to cross the Bab el-Mandeb Strait and instead headed north towards the Suez Canal. What does this detour mean? The "Xin Long Yang" was originally scheduled to travel about 7,000 miles to reach China. Now forced to go via the Suez Canal and then around the Cape of Good Hope, the total voyage will surge to over 17,000 miles—adding 10,000 miles and four weeks of travel time. Freight rates and fuel costs will skyrocket. More troublesome is the fact that a fully loaded VLCC cannot pass through the Suez Canal directly. It must offload about half its cargo before entering the canal for transfer via the SUMED pipeline, then reload after passing through. This "unload, load, unload, load" process further increases transport costs. The disruption is not limited to this one vessel. Another VLCC, the "New Prime," which was scheduled to arrive at Yanbu port this week to load oil, also turned back near Oman before entering the Red Sea. Meanwhile, several ultra-large crude carriers owned by Chinese shipping companies, including COSCO's "Yuan Xi Hu," "Xin Wei Yang," and "Yuan Xin Hu," as well as China Merchants Energy Shipping's "Kai Tuo," are all facing direct risks when navigating the Red Sea.
Supply Concerns: Some Refineries May Face No Crude in August
More worrying than rising freight costs is the supply itself. Bloomberg previously reported that due to weak Chinese crude demand and limited Saudi supply, at least two Chinese refineries have proactively requested a suspension of Saudi crude cargoes for August. Other refineries that have submitted procurement requests have yet to receive initial quotas. With the Strait of Hormuz having been effectively cut off by Iran for nearly five months, over 70% of Saudi crude exports have been forced to shift to the Red Sea port of Yanbu. Now, with the Bab el-Mandeb Strait also blocked, Saudi Arabia's two main export routes are under pressure simultaneously. Yanbu's daily crude export volume has surged to over 4.5 million barrels, nearing its operational limit. For China's refining industry, which is heavily dependent on Middle Eastern crude, this is a significant blow. Who will ultimately bear the pressure of rising oil prices? Brent crude prices have already broken through $90 per barrel. The surge in international oil prices is putting upward pressure on domestic refined oil product prices. Analysts point out that the impact of external oil and gas shocks on the Chinese economy will be more reflected in changes in cost elasticity and amplified expectation fluctuations. Simply put, higher oil prices increase manufacturing costs and logistics expenses, and these costs will be passed down the chain, ultimately reflected in consumer prices. The Red Sea-Suez Canal route is one of the "major arteries" of China's foreign trade. It is estimated that this channel carries about $120 billion worth of Chinese imports and $160 billion worth of Chinese exports annually. If the Bab el-Mandeb Strait is blocked for an extended period, it will not only affect oil transportation but also severely impact container trade between China, Europe, and the Middle East. Freight forwarders have already received notices from container shipping companies about price increases on Red Sea routes. Industry insiders believe that a full resumption of Red Sea navigation on European routes by June to August 2026 is essentially impossible. This means longer shipping cycles, higher fuel costs, and increasingly severe schedule disruptions.
China is Not Unprepared
However, there is no need for excessive panic. China's oil imports via the Strait of Hormuz account for about one-third of its total imports. These can be effectively diversified through three major overland pipelines: the China-Russia, China-Kazakhstan, and China-Myanmar routes. Combined with strategic and commercial oil reserves, as well as an annual domestic crude oil production of over 200 million tons, China has enough to support 240 days of national oil demand. Analysis from the Center for Strategic and Security Research at Tsinghua University indicates that China is primarily facing price shocks and expectation disturbances, rather than a rapidly evolving domestic physical supply crisis. Dong Xiucheng, an expert from the University of International Business and Economics, described the impact as "short-term pressure, long-term manageable." The forced U-turns of Chinese oil tankers in the Red Sea, the risk of supply disruptions for some refineries in August, and the continuous rise in freight rates on China-Europe trade routes are real challenges facing China. However, with a diversified energy import system, steadily increasing domestic oil and gas production, and continuously improving strategic reserves, China's resilience in the face of this "dual-strait crisis" far surpasses that of countries like Japan and South Korea, which are heavily dependent on Middle Eastern crude. In this dramatic transformation of the global energy landscape, China is both an epicenter bearing the impact and one of the few "ballast stones" capable of stabilizing the situation.
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