Saudi Arabia is seeking to store its oil in other countries, a shift from pumping more at home when demand rises. Its first deal, in Singapore, follows repeated strikes on Gulf energy infrastructure that have shaken confidence in U.S. protection.
Saudi Arabia is changing how it protects its crude oil supply. On 26 October the Kingdom struck its first overseas storage deal, to store crude at Singapore's Jurong Rock Caverns from the second half of 2027. The deal follows an announcement that Aramco and the Kingdom are seeking partners to expand their strategic oil stockpile.
Aramco aims to double overseas storage
Historically, the Kingdom responded to demand spikes by pumping more crude, drawing down domestic storage, or buying in spot and forward markets. Now, by seeking access to foreign government-owned stockpiles, particularly in Asia, Aramco wants to double its overseas storage capacity. Oilprice.com contributor Simon Watkins reads the move as a sign that Saudi Arabia can no longer rely solely on its own geography and security.
Saudi Arabia is also eyeing an expansion of its East-West Pipeline, which is 1,200 km long, to 10 million bpd within the next two to three years. Its output is currently around 8 million bpd.
Doubts over U.S. protection
Watkins writes that Saudi Arabia has allocated roughly $83 billion per year to its national defence budget. The U.S. accounts for nearly 80% of its weapons imports. Despite this, he says, Iranian proxy forces in Iraq and the Houthis launched repeated successful drone strikes on the East-West Pipeline.
Saudi Arabia is also widening its security ties. On 7 August it announced the Makkah Defence Alliance with Turkey and Pakistan. Watkins says the alliance has not achieved much so far and that its future effectiveness looks uncertain.
He adds that China could gain influence as Riyadh diversifies, potentially weakening Washington's regional position.
Source: Oilprice.com
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