The arrangement will not add barrels before the second half of 2027, so the near-term price impact is limited, but it signals that producers and consumers expect Strait of Hormuz risk to persist well beyond the current war. Storage closer to Asian refiners would give Saudi Arabia a buffer to keep supplying key customers during future disruptions, helping defend its market share in the region against rival suppliers. Over time, a strategic stockpile in Singapore could reduce the risk premium Asian buyers pay during supply scares and strengthen the city-state’s role as a regional pricing and trading hub. For now, oil markets remain driven by the immediate disruption to Hormuz flows, which this deal does not address.
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With the Strait of Hormuz no longer a safe bet, Saudi Arabia is planning to park its crude on Asia’s doorstep.
Summary:
- Saudi Arabia plans to store crude in underground caverns on Singapore’s Jurong Island from the second half of 2027, the two countries’ energy ministers said on Monday
- The announcement at Singapore International Energy Week aims to strengthen regional supply security as the US-Israeli war with Iran severely disrupts Strait of Hormuz flows
- Before the conflict, about two-thirds of Asia’s crude came from the Middle East
- Saudi Aramco is due to sign an MoU on Monday with Singapore’s Energy Market Authority and Jurong Group, with negotiations targeted to conclude within months
- Singapore says the arrangement will boost the resilience of Saudi supply chains in Southeast Asia and its own energy security during disruptions
Saudi Arabia plans to store crude oil in underground caverns on Singapore’s Jurong Island from the second half of 2027, in a move aimed at strengthening energy supply security across Asia as the war with Iran continues to disrupt shipments through the Strait of Hormuz.
The plan was announced on Monday by the energy ministers of Saudi Arabia and Singapore at Singapore International Energy Week. Singapore’s minister responsible for energy said the two countries had agreed in principle to set up the arrangement, which would make Saudi supply chains in Southeast Asia more resilient while also supporting Singapore’s own energy security in the event of supply disruptions.
Saudi Aramco is due to sign a memorandum of understanding on Monday with Singapore’s Energy Market Authority and Jurong Group, the state-linked developer of the island’s industrial estate. The parties aim to conclude negotiations within a few months.
The announcement reflects the strain the conflict has placed on Asia’s energy supplies. The US-Israeli war with Iran has severely disrupted flows through the Strait of Hormuz, the narrow waterway that carries much of the Gulf’s crude exports. Before the war, about two-thirds of Asia’s crude oil came from the Middle East, leaving the region’s refiners and governments heavily exposed to any interruption.
Holding Saudi crude in Singapore would place supplies within reach of major Asian buyers, giving the kingdom a way to keep serving customers if Gulf export routes are blocked or delayed. For Singapore, already a major refining and oil trading centre, the caverns would add a strategic buffer to its energy system.
The storage will not begin operating until the second half of 2027, so it offers no relief from the current disruption. But the deal suggests that both producers and consumers are preparing for a longer period in which Gulf supply routes can no longer be taken for granted, and further arrangements of this kind may follow as Asian importers look to diversify their exposure.
This article was written by Eamonn Sheridan at investinglive.com.