Oil and Gas Sector Update : Crude Compass: Rerouting the Barrel Choice Institutional Equities
Developments over the past week:
* Saudi Arabia is increasingly exporting crude via Egypt's SUMED pipeline and Sidi Kerir, while also using the Suez Canal, to bypass disruptions at both the Strait of Hormuz and Red Sea. The alternative routes add 20–30 days, increase freight costs, require VLCC cargo transfers, and cannot fully replace Red Sea export capacity
* The US said Iran launched ballistic missiles at American forces early Wednesday, while US and Saudi Arabia struck Iran-backed militias in Iraq after fresh drone attacks on Saudi oil facilities. The renewed hostilities ended a brief ceasefire, lifted Brent crude nearly 4%, and further reduced prospects for reopening the Strait of Hormuz
* The US Federal Reserve kept interest rates unchanged despite inflation concerns stemming from geopolitical disruptions. A steady rate decision is generally supportive for oil demand by avoiding tighter borrowing conditions and a stronger US dollar. However, renewed USIran tensions and elevated bond yields continued to drive broader market volatility.
In our opinion:
* Greater reliance on the Suez Canal raises Saudi Arabia's delivered cost into Asia through cargo transfers, draft constraints and an estimated ~US$5/bbl increase in logistics costs and in turn enhances the competitiveness of Latin American crude grades.
* A complete disruption of traffic through the Strait of Hormuz and Bab el-Mandeb Strait could interrupt exports of nearly 18 mbpd of crude oil and around 5 mbpd of petroleum products. Accounting for incremental supplies from alternative producers, we estimate the effective physical market deficit of crude at 11-13 mbpd
* The incremental exports from the US will be limited as the US Strategic Petroleum Reserve (SPR) reached historically constrained levels in the past few weeks
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
 Ltd ( 1 ).jpg)