Yemen Heats Up… A New Threat to the Global Oil Supply
We are seeing a major escalation in the Red Sea in the undeclared war between AnsarAllah and Saudi Arabia and this may spill over to the war the US is waging on Iran. As I write this the Houthis have retaliated to a Saudi attack on the Houthi-held port of Hodeidah. So let’s go through this week’s events.
On Wednesday July 22, Houthi military spokesman Yahya Saree claimed an attack on two Saudi oil tankers, the Encelia and the Layla, transiting the Red Sea, using drones and missiles. The stated justification was that the vessels violated the Houthis’ maritime blockade.
Saudi Arabia’s own Saudi Press Agency, citing an official at the Transport General Authority, confirmed the Encelia was hit, reporting a fire at the bow and all crew safe. UKMTO logged a master reporting his tanker struck by an unknown projectile with an onboard fire the crew were fighting. So the Encelia is confirmed by the flag state; the Layla is so far Houthi-claim-only — SPA didn’t provide details on it.
After the Encelia attack (Wednesday) and a further strike Friday on the Saudi vessel NCC MASA (minor hull damage, continued to destination per SPA), the Saudi-led coalition struck Houthi-held Hodeidah late Friday July 24. Al-Maliki framed it as a “proportionate military response against legitimate military targets” — sites used to threaten commercial shipping — and pointedly insisted the port itself wasn’t hit and remains open. The Houthis see it differently: Al Masirah says the strikes hit state telecommunications facilities in Hodeidah city and Kamaran Island (one woman injured there), with explosions reported at the port by Reuters. The Houthi Foreign Ministry warned Riyadh has made “escalation for escalation” the defining feature of the coming phase and that the strike “will prove costly.”
And sure enough, within hours, the Houthis launched 5 ballistic missiles launched at the ARAMCO oil terminal at Jazan Port, Saudi Arabia. The Saudi Aramco facilities in Jazan (also spelled Jizan) represent one of the company’s most ambitious and technologically advanced downstream projects — a fully integrated refinery, petrochemical complex, and power generation hub located in the far southwest of the Kingdom, on the Red Sea coast. The refinery is a full-conversion refinery, meaning it can process heavy crude into high-value light products rather than simply separating crude into fractions. Jazan is the largest gasification-based power facility in the world.
The Jazan complex is not merely a refinery — it is a fully integrated energy ecosystem that converts crude oil into refined products, petrochemicals, electricity, hydrogen, and industrial metals, all while minimizing waste and emissions. It represents Saudi Aramco’s vision of a smarter, lower-carbon downstream future and serves as the economic anchor for one of the Kingdom’s most ambitious regional development initiatives. In other words, the Houthis hit an extremely important Saudi Arabian energy asset.
The ball is now in the Saudi court. Will they escalate and attack the port facilities at Hodeidah or will they decide to call a halt to military operations and seek a diplomatic resolution? The smart move will be to go the diplomatic route. If they choose to strike more targets in Houthi-held territory then the Houthis’ next logical target would be the oil terminals at Yanbu. There are two main crude oil export terminals at Yanbu, Saudi Arabia. These two Saudi Aramco-operated terminals handle the bulk of crude oil exports from the Red Sea port (connected via the East-West Pipeline). Together they have a nominal combined loading capacity of roughly 4.5 million barrels per day (about 1.5 million bpd at North and 3 million bpd at South). An attack that damages or destroys these terminals would add to the global oil shortage. This makes for an interesting weekend, to say the least.
While Iran continued to blast Kuwait and Bahrain, the US was uncommonly quiet on the military front… Nima and I discussed it:
Today was an emotional day for the INTEL Roundtable. My dear, old friend Ray McGovern is retiring from the Judge’s show. Joe Kent has agreed to replace the irreplaceable Ray, and I’m thrilled that Joe has agreed to pick up the mantle. Ray ain’t going away, but at 87 he deserves a break:
Mario and I reviewed the news of the day… Not much on the military front:
Sulaiman had a relatively quiet show compared to the usual “breaking news” that dominate his regular shows:
Here is my latest Counter Currents:
I am very impressed with Larry’s grasp of facts and the accuracy thereof. The pipeline that carries crude across the desert to Yanbu has a capacity of approximately 7mbd. One would hear on various media that Yanbu was loading this amount when restriction was placed on the straits which is incorrect. Larry is spot on, there are 2 terminals at Yanbu, north and south with a total load capacity of approximately 4.5 mbd. Prior to using Yanbu to its full capacity, Yanbu was only loading an average of 1.3 mbd.
Larry has not only become an oil man but also a shipping man!
There are various conflicting reports on the shipping situation after Ansar Allah imposed restrictions through the Bab. There are reports that 2 Chinese owned VLCCs have gone through but it’s not crystal clear. A VLCC is around 300,000 dead weight tons and carries 2mb of crude. Fully laden, it cannot pass through the Suez due to the draught. They can pass partially laden. What is usually done is they off load some crude at the Egyptian terminal at Ain Sokhna on the Red Sea close to the Suez and the crude is transferred in the Sumed pipeline to Sidi Kerir on the Med and the same VLCC picks it up from there. This route using the Cape of Good Hope adds at least 30 days sailing time to customers in Asia.
Suezmaxs that can carry 1mb of crude have no trouble going through the Suez and the same applies to smaller tankers such as Aframaxs and clean product tankers such as LR1 and LR2 which can also be used to carry crude when the time charter rates are attractive.
So now we are waiting for two earth-shattering decisions, and each will have an effect on the flow of oil out of the Mideast.
1. Will Saudi Arabia attack Yemen again, or will they seek peace with AnsarAllah?
2. Will the US unleash its "massive air attack", or will it continue with its smaller strikes?
The worst action by each will cause big retaliations. The flow of oil will be either damaged or further curtailed, or both.
Let us hope and pray for rational, cooling heads.