According to WPB, ship-to-ship oil transfer operations in the Gulf of Oman have reached their practical capacity limits after a sharp increase in Saudi crude movements joined already elevated flows from Iraq, the United Arab Emirates and other Middle Eastern producers using waters outside the Strait of Hormuz as an alternative export point. The development marks a new stage in the region’s shipping disruption: producers have succeeded in keeping substantial oil volumes moving, but the workaround that helped protect exports is now becoming a bottleneck itself.
The pressure intensified after damage to Saudi Arabia’s East-West Pipeline interrupted crude exports through the Red Sea port of Yanbu in mid-September. Saudi Aramco responded by shifting a much larger share of exports toward terminals inside the Gulf and moving crude through the Strait of Hormuz before transferring cargoes to onward vessels off Oman. Saudi crude exports through Hormuz were on track to reach about 3.6 million barrels per day in September, compared with roughly 900,000 bpd in August.
The shift has been large enough to alter tanker requirements across the Middle East Gulf export system. Saudi Aramco has sold more than 60 million barrels of crude for ship-to-ship transfer off Sohar during September and October, while the nearly 3 million bpd increase in Saudi flows through Hormuz could require an additional 36 to 40 VLCCs. Each VLCC typically carries around 2 million barrels, meaning relatively small increases in turnaround time can absorb a substantial amount of available tonnage.
The bottleneck is no longer limited to finding enough large tankers. Queues have also developed around the support services required to complete STS operations, including tugboats, labor and transfer equipment. STS volumes involving crude loaded on VLCCs from ports west of Hormuz have remained around 6 million bpd since late August, equivalent to roughly three pairs of VLCCs beginning transfer operations each day.
The time required to complete each operation has also increased materially. A typical STS cycle near the Strait now requires close to 10 days, compared with roughly five to seven days previously. Tanker capacity is determined not only by the number of ships in the fleet but also by how quickly each vessel can complete a voyage or transfer cycle and return for another cargo.
A tanker that spends several additional days waiting for an STS window is effectively removed from the available fleet for that period. When the same pattern is repeated across dozens of VLCCs, vessel requirements rise much faster than the underlying increase in export volume. A 2 million bpd increase in Saudi flows alone could generate demand for around 15 additional VLCCs for shuttle operations, while another 20 VLCCs have effectively been tied up in the Mediterranean awaiting the restoration of normal Yanbu operations.
The tightening has already moved into freight markets. The daily time-charter equivalent for a VLCC carrying Middle Eastern crude to China reached a record of around $1.27 million in late September. Earlier in the month, the Oman-China VLCC index had already climbed to about $871,000 per day, while the main Middle East Gulf-China benchmark approached $1.2 million per day.
The congestion therefore represents more than a localized operational problem off Oman. Higher waiting times reduce vessel productivity, lower productivity tightens effective tanker availability, and tighter availability increases the cost of moving each additional barrel. The network continues to function, but each additional unit of export capacity is becoming progressively more expensive and more vessel-intensive.
The Omani STS system expanded as a way to reduce tanker exposure to the Strait of Hormuz. Instead of sending every large vessel deep into the Gulf and keeping it exposed to the high-risk corridor for a full loading cycle, producers increasingly used shuttle tankers to move crude through the Strait and then transfer it in waters off Oman to vessels continuing toward Asia. This helped preserve exports and make more intensive use of a constrained tanker fleet, but the success of the system has now created congestion at the transfer stage.
STS activity in the Gulf of Oman was comparatively limited before the current disruption. Liquid STS activity in the area averaged only about 160,000 bpd in 2025 but has averaged around 3.7 million bpd since the latest regional disruption began and reached new highs during September. These figures should not be treated as unique export volumes because the same barrels can be counted more than once when cargoes undergo multiple transfers.
The more important issue is operational intensity. More cargoes are being transferred between vessels, more ships are spending time waiting or maneuvering around transfer areas, and more auxiliary marine capacity is required for every export cycle. The same physical barrel now requires more vessel time and more supporting infrastructure to move from a Gulf loading terminal to an Asian refinery.
Saudi Arabia’s sudden increase has been added to a system already being used heavily by other producers. Iraq and the UAE have expanded their reliance on STS arrangements outside Hormuz, increasing competition for transfer windows and vessel capacity. Iraq’s state marketer SOMO has also expanded crude sales outside the Strait, including Qayara crude offshore Sohar and a tender for 2 million barrels of Basrah Heavy for STS loading near Oman.
This is what separates the latest development from the previously reported Iraqi cargo. The Basrah Heavy tender demonstrated how one producer could move a specific cargo outside Hormuz; the current bottleneck shows what happens when Saudi Arabia, Iraq, the UAE and other producers scale the same logistics solution simultaneously. The question is no longer whether STS can work, but how much volume the regional transfer infrastructure can process efficiently.
Buyers are already examining alternatives beyond Oman. Transfer locations off India’s west coast and in Malaysia are being considered, while some cargoes may move directly from Gulf terminals to Asian refineries without an intermediate STS operation. Two VLCCs linked to South Korea’s S-Oil have been directed toward transfer operations off Vadinar on India’s west coast, while increased activity has also been observed near Linggi in Malaysia.
Moving the transfer point farther east relieves one constraint but creates another. Every additional mile increases voyage time and keeps either the shuttle tanker or receiving VLCC occupied for longer. Under a base-case configuration, handling roughly 3 million bpd of additional Saudi crude could require 36 to 40 extra VLCCs, while a scenario relying more heavily on Malaysia could increase the requirement to as many as 58 vessels, compared with around 25 under a more concentrated Gulf-based configuration. These are scenario estimates rather than confirmed vessel requirements, but they show how quickly fleet demand can rise as transfer locations move farther away.
India’s west coast is geographically closer than Malaysia and can therefore offer better vessel economics, although operational capacity and seasonal conditions can limit the volume that can be transferred there. Malaysia has established transshipment areas and direct access to major Asian trade lanes, but longer shuttle rotations reduce vessel productivity. Direct delivery to refineries removes one STS stage entirely, yet it requires both vessels and buyers to accept the security and scheduling constraints associated with longer voyages originating inside the Gulf.
The gradual return of Saudi Arabia’s East-West Pipeline could eventually ease part of the pressure. Oil movements through the system have restarted at reduced rates, allowing Saudi Arabia to begin restoring westward flows toward Yanbu. Full restoration, however, is expected to take several weeks because of damage to pumping infrastructure, leaving the Gulf of Oman STS network heavily utilized during the repair period.
For the tanker market, the key issue is effective vessel availability rather than the total number of ships in existence. Saudi Arabia operates access to one of the world’s largest VLCC fleets, with individual vessels capable of carrying more than 2 million barrels, but even a fleet of that scale cannot fully offset the broader market effect when dozens of VLCCs are committed to shuttle operations, waiting periods lengthen and record freight earnings attract additional ships toward the Middle East.
The impact therefore extends beyond Saudi crude itself. Exceptionally high VLCC earnings alter global positioning patterns by pulling vessels toward the routes generating the strongest returns. Longer waiting periods and stronger rates in the Gulf can consequently reduce available capacity in West Africa, the Atlantic Basin and other regions even when those markets are not directly involved in Oman STS activity.
For the bitumen market, the connection must be treated more carefully. There is currently no evidence that the Gulf of Oman STS capacity limit has caused a measurable reduction in Middle Eastern bitumen production or exports, and the VLCC market cannot be directly equated with the specialized heated vessels normally used to transport bulk bitumen. The bottleneck remains primarily a crude-oil logistics problem rather than evidence of a direct bitumen supply loss.
The indirect exposure is nevertheless relevant. STS congestion increases competition for anchorage space, tugboats, marine personnel, agency services and transfer windows across an already heavily utilized shipping corridor. Record crude tanker economics also increase the opportunity cost of marine capacity across the region. If crude is increasingly prioritized at major transfer locations, other petroleum cargoes may have to use more distant routes or alternative logistics arrangements, adding time and cost to the wider Gulf shipping system.
Additional crude capacity in the Gulf of Oman could partly be created by prioritizing crude transfers while shifting some petroleum-product movements toward India’s west coast. This does not establish that bitumen cargoes will be displaced, but it provides a credible mechanism through which a crude-driven STS bottleneck could indirectly affect the timing and cost environment surrounding other petroleum exports.
For Gulf bitumen suppliers, the variables to monitor are therefore vessel availability, anchorage congestion, waiting times and regional freight rather than an assumed decline in physical bitumen supply. Product may remain available at a refinery or terminal while its delivered cost rises because ships take longer to position, loading schedules become less predictable or freight premiums increase.
This distinction matters particularly for Asian buyers because freight represents a significant part of the landed cost of Gulf bitumen. Even when FOB values remain unchanged, higher vessel costs or longer voyages can widen the gap between the export-terminal price and the final delivered price in India, Southeast Asia or China. Sustained pressure on regional marine capacity can therefore alter bitumen trade economics without changing refinery production.
The situation also demonstrates the limits of treating alternative export routes as unlimited substitutes for Hormuz or the Red Sea. Saudi Arabia’s East-West Pipeline, Yanbu and Gulf of Oman STS operations have each helped preserve flows at different stages of the disruption, but every alternative has its own physical capacity, security exposure and logistics cost. When one route is disrupted, volumes move to another; when too much volume reaches the alternative, congestion and freight become the next constraint.
For now, the Gulf of Oman network continues to move substantial volumes rather than shutting down. The problem is that the same system is now operating with lower efficiency, longer transfer cycles and much higher vessel requirements. The market is therefore dealing with a logistics bottleneck rather than a complete export stoppage.
The next development to watch is whether the gradual restoration of Saudi flows through Yanbu reduces pressure on Oman before alternative STS hubs are forced to absorb significantly more crude. If the East-West Pipeline returns toward normal throughput, Saudi demand for Gulf shuttle tankers could ease and release part of the VLCC fleet. If repairs take longer or another regional export route is disrupted, current congestion could evolve from a temporary bottleneck into a more persistent constraint on Middle Eastern oil logistics.
For the bitumen market, WPB assesses the immediate impact as indirect rather than a confirmed supply shock. The Gulf of Oman capacity limit does not prove that fewer tons of bitumen are being produced or exported, but it raises the likelihood of higher shipping costs, more complicated vessel scheduling and longer delivery chains for petroleum cargoes moving through the region. Evidence of actual delays in bulk bitumen liftings, higher bitumen-tanker freight or reduced cargo availability would represent the next step from logistics risk to a directly measurable effect on the bitumen market.
By WPB
Gulf of Oman STS, ship-to-ship transfer, Oman oil transfers, Sohar STS, Saudi crude exports, VLCC availability, tanker shortage, tanker freight, Strait of Hormuz, Saudi Aramco, East-West Pipeline, Yanbu, Iraq crude exports, Basrah Heavy, oil shipping, marine congestion, bitumen freight, Middle East bitumen
