Key Takeaways:
South Korea's four refiners are considering Venezuelan crude imports for the first time in years as the Strait of Hormuz blockade forces Asia's top buyers to rewrite supply chains.
South Korea's four refiners are weighing imports of Venezuelan crude to diversify supply as the Strait of Hormuz blockade enters its fifth month, the Korea Petroleum Association said Thursday.
"The disruption in Middle East shipping has pushed us to explore alternative grades we wouldn't have considered before," an association official said, speaking on condition of anonymity because the discussions are private.
Brent crude traded at $91.80 a barrel Thursday, up 1.2%, after the U.S. military struck Islamic Revolutionary Guard Corps targets across Iran. WTI crude rose 0.5% to $84.85. Before the conflict, roughly 15 million barrels of Persian Gulf oil transited Hormuz daily — about one-fifth of global supply.
The potential shift by South Korea — the world's fourth-largest crude importer — signals a structural realignment of global oil flows. If Asian refiners permanently diversify away from Middle Eastern grades, Gulf producers could lose their most reliable customer base, reshaping pricing benchmarks and tanker routes for years.
Pipeline Race Accelerates as Bypass Capacity Grows
At least seven major pipeline projects are under construction or in planning across the Gulf, according to government officials and analysts. Saudi Arabia's East-West pipeline, built during the Iran-Iraq war in the 1980s, is now running near full capacity, carrying crude from Abqaiq to the Red Sea port of Yanbu. The UAE is accelerating a $3 billion, 200-mile pipeline to Fujairah on the Gulf of Oman, now roughly halfway complete, according to data firm Kpler. Completion is targeted for early 2027.
Iraq, which depends on Hormuz for nearly all of its 3 million-plus barrels of daily exports from Basra, is pursuing pipeline routes to Turkey's Ceyhan port and Jordan's Aqaba on the Red Sea. Goldman Sachs analysts estimate the new projects could carry an additional 3.8 million barrels per day by the end of 2026 and 7.3 million barrels per day by the end of 2028 — enough to bypass roughly 60% of the Gulf's prewar exports of 23 million barrels per day.
Alternative Routes Face Their Own Risks
The alternatives to Hormuz are not immune to disruption. Yemen's Iran-backed Houthi rebels said Thursday they attacked two Saudi oil tankers in the Red Sea, a key transit corridor for crude piped to Yanbu. The Houthis previously shut down the Saudi East-West pipeline with a drone strike in May 2019.
For South Korean refiners, Venezuelan crude offers a heavy-sour grade similar to Middle Eastern barrels but requires longer shipping times and carries political risk. The U.S. has gradually eased sanctions on Venezuela's oil sector in recent months as part of broader diplomatic efforts, though restrictions remain. Any shift in volumes would also pressure heavy-sour crude differentials globally, potentially benefiting other heavy crude producers such as Canada and Mexico.
The longer the Hormuz disruption persists, the more likely these supply chain changes become permanent. Pipeline investments worth tens of billions of dollars are already locked in, and once built, they rarely sit idle.
This article is for informational purposes only and does not constitute investment advice.
