Saudi Arabia will begin storing crude oil in Singapore from the second half of 2027 under a new arrangement aimed at strengthening supply security for Asian buyers while flows through the Strait of Hormuz remain disrupted.

Energy ministers from both countries said on Monday that Saudi crude will be held in underground caverns on Singapore's Jurong Island. Saudi Aramco is due to sign a memorandum of understanding with Singapore's Energy Market Authority and JTC Corp, with talks targeted to conclude within months.

The plan puts Saudi barrels closer to Asian customers, cutting the distance and risk involved in shipping crude from the Gulf at a time when regional tensions have disrupted transit routes and raised fears of supply shocks. Singapore is one of Asia's largest oil trading and refining centres, making it a natural location for a strategic stockpile.

Prices still elevated

The announcement comes as crude prices remain elevated despite a pullback on Monday. Brent crude futures slipped to about $114.60 a barrel in early Asian trading, retreating from near six-month highs reached late last week after attacks on Saudi targets stoked supply concerns. US benchmark West Texas Intermediate fell to about $101.13 a barrel at the same time.

Saudi Arabia is the world's largest oil exporter, and any threat to its production or export routes feeds quickly into global prices. A stockpile in Singapore would give the kingdom a buffer in Asia that could be drawn on if Gulf shipments are interrupted.

No volume disclosed

No storage volume has been disclosed, and the arrangement remains subject to the memorandum being signed. Further details on capacity and timing are expected as talks progress.

Sources: Reuters; The Business Standard (prices).