Saudi Arabia is in talks with crude oil buyers over a plan to complete crude loadings outside the Strait of Hormuz starting next year, incorporating this arrangement into long-term supply contracts, according to people familiar with the matter. This transshipment model was already deployed during the Iran conflict, and Saudi Arabia now aims to make it a permanent fixture in order to capture a larger market share.

The discussions are still ongoing and need to be finalized before the end of this year, the people said. If the plan is approved, Saudi Arabia's crude delivery model would undergo a major overhaul, as deliveries under long-term contracts account for the vast majority of the kingdom's supply volumes. The eight-month-long Iran conflict has disrupted traditional crude shipping routes, severely impairing navigation through the Strait of Hormuz. Major Gulf oil exporters have been forced to adjust their operations to ensure supply to customers.

As competition for buyers intensifies, the Hormuz transshipment model has become a critical mechanism for securing market supply: the seller bears the risk of navigating the strait and transfers crude to other tankers outside the waterway. According to the people familiar with the matter, Saudi Aramco is also discussing other adjustments, including offering a choice of pricing benchmarks and even delivering cargoes directly to Asian customers. No final decisions have been made, and details including pricing, freight rates, and available volumes remain under discussion. Neither Saudi Aramco nor the Saudi Ministry of Energy responded to requests for comment on the negotiations.

Before the conflict erupted, Saudi Aramco's key Asian customers arranged their own tankers to pick up cargoes at the Ras Tanura export terminal deep inside the Persian Gulf, with shipping arrangements typically not handled by the Saudi side. After the conflict broke out, some shipowners became unwilling to sail into the Strait of Hormuz. Even with ample crude supply, buyers struggled to charter tankers at reasonable costs. Against this backdrop, the UAE, Saudi Arabia, Kuwait, and Iraq activated the Hormuz transshipment option, completing crude deliveries through ship-to-ship transfers outside the strait.

Saudi Aramco has already supplied three main crude grades through this transshipment mechanism: Arab Light, Arab Medium, and Arab Heavy, the people said. Other sources revealed that Saudi Aramco recently allowed some buyers to conduct ship-to-ship crude transfers off the coast of India. For customers unable to reach the Gulf of Oman due to security concerns, this is a relatively safe alternative that also helps ease congestion at Arabian Peninsula ports.

Saudi Aramco is also studying shipping arrangement options and attempting to deliver more crude directly to customers, the people said. Beyond ensuring smooth exports, such arrangements would allow Saudi Aramco to share in some of the proceeds from surging Hormuz tanker charter rates. Some Asian buyers are negotiating with Saudi Aramco to switch long-term contract crude purchases to Brent futures pricing, replacing the current Dubai and Oman benchmark prices, according to sources. This would also mean the Gulf oil producer gains greater pricing flexibility.