Saudi Arabia Seeks Overseas Crude Storage as Hormuz Risk Reshapes Policy

Saudi Arabia's average oil output since 1973 stands at 8.295 million bpd, and it pumps roughly 8 million bpd today — but the number that moved markets this month is different: Aramco wants to double its overseas crude storage by parking barrels inside its customers' borders, starting with up to 1.47 million cubic metres of capacity at Singapore's Jurong Rock Caverns from the second half of 2027.

The deal, struck on 26 October, is the first of what Riyadh intends to be a series of partnerships giving the Kingdom access to government-owned strategic stockpiles abroad, particularly in Asia. It marks a break from decades of practice.

What changed in Riyadh's playbook?

Historically, Saudi Arabia answered demand spikes three ways: pump more from domestic fields, draw down domestic storage, or buy barrels in spot and forward markets. The new policy concedes that Middle East infrastructure is too exposed to carry that burden alone.

The shift is from "we will get it when you need it" to storing millions of barrels in the customer's own country, so a single drone strike cannot trigger a global supply shock. The logic is hard to argue with given the record.

In September 2019, drone and missile strikes attributed to Iran's Houthi proxies hit the Abqaiq and Khurais processing facilities — together about 50 percent of Saudi production, roughly 5 percent of global supply. Oil prices spiked by up to 20 percent in what analysts rank among the most significant energy-infrastructure strikes ever recorded.

Since then, despite THAAD interceptors, Patriot batteries and early-warning radars bought from Washington, proxy forces have repeatedly struck the 1,200 km East-West Pipeline, while Houthi missiles and drones have reached the Rabigh refinery and other Aramco nodes.

The pattern extended to neighbours: Iranian strikes disabled the AN/FPS-132 radar in Qatar, multiple AN/TPY-2 radars, Bahrain's AN/TPS-59 radar and a string of MQ-9 Reapers. The takeaway is blunt — U.S. hardware did not stop the attacks.

Saudi Arabia spends roughly USD 83 billion a year on national defence, with the U.S. supplying nearly 80 percent of its weapons imports on baseline agreements valued around USD 75 billion annually.

What is IMEC, and why does Hormuz drive it?

Aramco is also working on alternative export routes around the Strait of Hormuz, the Bab al-Mandab Strait and the Suez Canal. Riyadh expects demand to rebound once the war ends.

The centrepiece is the India–Middle East–Europe Economic Corridor (IMEC), launched at the 2023 G20 Summit and stalled by regional conflict until this year's Hormux blockade forced planners to accelerate it. Planners now estimate IMEC could eventually divert around 60 percent of the container traffic that historically transited the Strait of Hormuz.

Its architecture has two legs:

• An eastern maritime leg linking India's western ports to the Arabian Gulf — redesigned in 2026 to anchor in Oman rather than the UAE, so ships unload entirely outside Hormuz.
• A northern overland rail network through Saudi Arabia and Jordan to Israel's Port of Haifa, with short-sea shipping on to Europe.

"IMEC Plus" nodes through Egypt and Syria are under discussion, and a very senior source inside the EU's security complex told OilPrice.com that the India–EU free trade agreement and the U.S. Senate's Eastern Mediterranean Gateway Act have formally designated Greece as Europe's entry hub.

In parallel, Saudi Arabia is eyeing expansion of the East-West Pipeline — which moves crude from eastern fields to the Red Sea port of Yanbu — to 10 million bpd within two to three years.

Does the Makkah Defence Alliance change the security math?

On 7 August, Saudi Arabia announced the Makkah Defence Alliance with Turkey and Pakistan, built on NATO Article 5-style collective defence. Saudi Arabia brings financing and intelligence networks; Turkey brings military hardware and drone and artillery production lines; Pakistan brings a large frontline military and nuclear weapons.

Pakistan's Defence Minister Khawaja Asif said his country's "full military capabilities" would be available under the defence agreements. Officials later clarified the pact is strictly defensive and conventional.

So far the alliance has achieved little, and its effectiveness looks uncertain at best. What is not uncertain, as analysts including OilPrice.com's Simon Watkins note, is that China could halt the attacks with a few words to Tehran — threatening to stop buying Iranian oil and gas and to cut off critical materials and expertise.

What to watch

The watch items are concrete: whether more storage deals follow the Singapore template, whether the East-West Pipeline hits its 10 million bpd target inside three years, and how quickly the Oman-anchored IMEC redesign moves from planning to steel.

Riyadh's answer to a map full of chokepoints is to stop relying on the map.