Since the Iran-backed Houthi group announced artillery strikes and a maritime blockade on Saudi energy shipments, Riyadh has been seeking alternative export routes outside the Red Sea. This has led to a significant increase in Saudi oil exports via a pipeline crossing Egypt to the Mediterranean region.
The surge in Saudi oil exports through Egypt's SUMED pipeline to the Mediterranean port of Sidi Kerir in August is not fundamentally about "adding global crude supply." Instead, it represents a strategic restructuring of export routes after constraints in the Strait of Hormuz and threats from the Houthis in the Bab el-Mandeb Strait. August exports from Sidi Kerir jumped from about 1 million barrels per day (bpd) in July to approximately 2.3 million bpd, with the vast majority being Saudi crude. Reuters independent shipping data shows that last week, loadings at the port hit a record of about 2.17 million bpd, with roughly 90% being Saudi crude.
This route allows Saudi crude to bypass the southern Red Sea, but at the cost of significantly higher shipping distances, freight rates, insurance costs, and delivery times. For Asian buyers, rerouting via the Cape of Good Hope can add about an extra month to the voyage. Therefore, the SUMED pipeline functions more as an extreme "safety valve" for the global energy transport market rather than new capacity that can eliminate supply risks in the short term.
The international oil benchmark, Brent crude futures, has accurately reflected the two-way game of "geopolitical supply risk providing a floor, while demand destruction caps the upside." Brent crude closed above $100 per barrel on July 23 due to Houthi attacks and escalating US-Iran tensions, but had fallen back to around $88.56 per barrel by August 13, with WTI crude at about $82.72 per barrel. Besides deteriorating demand expectations, an unexpected surge of 17.4 million barrels in US crude inventories last week also created short-term pressure. However, the supply side remains far from normal: US-Iran negotiations remain deadlocked, and shipping volumes through the Strait of Hormuz are still well below pre-conflict levels. Since the Houthis announced a maritime blockade on Saudi shipping on July 20, they have also claimed attacks on Saudi tankers, the Yanbu facility, and the Jazan refinery, forcing more tankers to turn off their AIS transponders for "dark shipping," and significantly reducing traffic through the Bab el-Mandeb Strait.
In other words, Saudi Arabia is facing the rare "double chokepoint risk" of blocked eastward exports via the Strait of Hormuz and threatened southwestern exports via the Bab el-Mandeb Strait. The SUMED export route appears to alleviate but cannot fully replace these two global-level shipping channels. The current high oil prices are not a healthy demand-driven supercycle but a supply shock scenario shaped by "blocked transport chokepoints, inventory depletion, and war risk premiums." The surge in SUMED exports itself proves that the global petroleum logistics system is under strain. In the short term, crude oil still has a strong upward tail risk, but once geopolitical risks are genuinely resolved, the supply floodgates that could open in 2027 will become the most powerful force for mean reversion in oil prices.
Red Sea Risk Triggers "Mediterranean Pivot"! Saudi Oil Exports Rerouted via SUMED as Oil Market Enters High-Cost "Bypass the Red Sea" Norm?
According to data from trade intelligence firm Kpler, Saudi oil exports from the Egyptian Mediterranean port of Sidi Kerir more than doubled in August from the previous month, rising from about 1 million bpd to approximately 2.3 million bpd. Matt Smith, head of commodity research at Kpler, indicated that the vast majority of this is crude oil produced in Saudi Arabia. Smith stated, "This is not a short-term decision. It's a clear change in strategy or market dynamics."
Sidi Kerir is connected to the Red Sea port of Ain Sukhna via the SUMED pipeline. Smith explained that fully laden supertankers have too deep a draft to pass through the Suez Canal, so they pump half of their Saudi crude cargo into the pipeline at Ain Sukhna, transit the Suez Canal, and then reload that portion at Sidi Kerir. As Iran and its allies continue to pressure the Strait of Hormuz, a major Middle Eastern oil transport chokepoint, Saudi Arabia is under increasing strain. Since the beginning of the year, due to Iranian restrictions on shipping in the Strait of Hormuz, Riyadh has already been diverting millions of barrels of crude daily via a pipeline from eastern Saudi Arabia to the Red Sea port of Yanbu. However, Houthi attacks on Saudi tankers in the Red Sea are now pressuring oil exports through Yanbu and the Bab el-Mandeb Strait.
Smith commented, "There's a huge dislocation happening here. It is clear that the Saudi government is not taking this lightly, and they anticipate this becoming a new trend." Kpler data shows that in the week ending August 3, Saudi crude exports via Yanbu and the Bab el-Mandeb Strait fell to 1.3 million barrels, down nearly 90% from the 11 million barrels in the week ending July 20, the day the Houthis announced the blockade. Tankers shipping Saudi crude in the Red Sea often turn off their transponders to avoid Houthi attacks, making it difficult to accurately track oil flows. However, Amin Nasser, CEO of the state-controlled energy giant Saudi Aramco, stated earlier this month that Riyadh has alternatives to bypass the southern Red Sea and the Bab el-Mandeb Strait. Nasser said on Aramco's earnings call on August 4, "As you know, we have multiple options, through multiple corridors and alternative routes, via the SUMED pipeline and the Suez Canal into the Mediterranean."
For Asian customers, who are typically supplied by Saudi Arabia, tankers must take a longer, more expensive route around Africa. Nasser noted on the call that this route takes about 25 days longer compared to exports via the Bab el-Mandeb Strait. Smith indicated that most of the oil currently exported from Sidi Kerir is going to the US and Europe, not to energy-demanding regions in Asia. This suggests that Asian customers are selling these cargoes because "it's not cost-effective to have them travel all the way around Africa." Smith added, "We're seeing a domino effect. Europe is getting more crude from Saudi Arabia, so perhaps, West African crude that was originally destined for Europe will now flow to Asia." However, rerouting Saudi oil flows through Egypt is unlikely to completely eliminate the risk of attack. On July 30, two LNG carriers at Egypt's Damietta port were attacked by a large swarm of drones with no traceable origin. No one has claimed responsibility for these attacks.
IEA-OPEC Demand Divergence Hints at "Tight Then Loose" Oil Market Shift
The substantial increase in Saudi oil exports via the SUMED pipeline to the Mediterranean represents a strategic restructuring of export routes, not new capacity that can eliminate supply risks. On the demand side, there is a rare and significant divergence between OPEC and the International Energy Agency (IEA). OPEC has revised down its 2026 demand growth forecast for four consecutive months, currently still predicting an increase of 580,000 bpd in global oil demand. However, it has raised its 2027 growth forecast further to about 2.16-2.2 million bpd. The IEA is far more pessimistic, forecasting a direct decrease of 1.6 million bpd in global demand for 2026, a further downward revision of about 510,000 bpd from the previous month, though it also expects a strong rebound of 2.4 million bpd in 2027.
The key factor keeping oil prices at the high $80 to $90 level this year is that the supply decline is faster than the demand decline. The IEA expects global supply to fall by 4.3 million bpd to about 102 million bpd in 2026, with a supply-demand deficit of about 1.8 million bpd in the third quarter. Global observable inventories have decreased by about 410 million barrels since the start of the conflict. Therefore, even if the IEA sees severe demand destruction, the spot market is in a genuine shortage, not a traditional demand-recession bear market. The future trajectory of crude oil prices is more likely to follow a classic pattern: a "2026 geopolitical risk bull market, followed by a supply normalization stress test in 2027." In the short term, as long as the Strait of Hormuz remains unstable and the Houthis continue to threaten the Bab el-Mandeb Strait, Brent crude has a significant war risk premium underpinning it. Any new attack on tankers, ports, or pipelines could quickly reprice tail risk to $95-100 or higher. However, if the US and Iran reach a credible agreement and the two straits return to normal shipping, leading to a rapid return of Middle Eastern production, weak demand will immediately shift from a secondary concern to the primary driver. The IEA forecasts that global supply could rebound by a massive 8.3 million bpd to 110.3 million bpd in 2027, while demand grows by only 2.4 million bpd. Based on its current projections, the market could then face a significant supply surplus of about 4.6 million bpd.
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