Saudi Arabia boosts revenue due to Hormuz blockade

The blockade of the Strait of Hormuz is creating an economic split among oil exporters in the Persian Gulf, with Saudi Arabia and Oman set for a windfall and others including the UAE seeing a drop in petrodollar income, Bloomberg reported.

Saudi Arabia is gaining a revenue edge over most of its Gulf Arab neighbors as it is able to divert the bulk of crude exports to the Red Sea, with higher prices compensating for lost shipments through the strait.

The six Gulf Cooperation Council members are losing about $700 million in oil revenue every day the strait is closed, according to Goldman Sachs Group Inc.

The blockade of the Strait of Hormuz is creating an economic split among oil exporters in the Persian Gulf, with Saudi Arabia and Oman set for a windfall and others including the United Arab Emirates seeing a drop in petrodollar income.

Saudi Arabia is gaining a revenue edge over most of its Gulf Arab neighbors as it is able to divert the bulk of crude exports to the Red Sea. Higher prices more than compensated for lost shipments through the strait, according to Goldman Sachs Group Inc. The UAE, by contrast, is likely suffering a steep fall in oil income, as its own detoured barrels only partially mitigate the impact from Hormuz’s closure.

Goldman estimates weekly oil revenue rose 10% relative to pre-war levels in Saudi Arabia and fell around 25% in the UAE.

The divergence may feed into the intensifying rivalry between the Middle East’s two biggest economies, which was at the heart of UAE’s shock decision to quit OPEC this week. Free from quotas imposed by the Saudi-dominated group of oil producing nations, the UAE can - once the Hormuz strait reopens - pump more crude and monetize its reserves before demand tapers off with the energy transition.

The overall financial implications of the war on one of the world’s most important energy-exporting regions are severe. The six Gulf Cooperation Council members are losing about $700 million in oil revenue every day the strait is closed, Goldman said.

Since the war began in late February, Riyadh has rerouted around 4 million barrels of oil a day to its East-West pipeline, which connects fields to the port of Yanbu. The UAE ramped up oil shipments through its own pipeline that empties beyond Hormuz. It loaded about 2 million barrels each day in March, still only half what it was exporting in February.

Oman, which has its oil ports outside of the strait, hasn’t had to cut exports and has seen its revenue surge by 80% since the conflict erupted, Goldman estimates. Kuwait, Qatar, Bahrain and Iraq are in the worst positions. Their income from oil and natural gas has cratered as they have little way of bypassing Hormuz.