Saudi crude storage deal puts oil in Singapore caverns from 2027
Saudi Arabia will park crude 150 meters under Jurong Island from the second half of 2027, a hedge against the Hormuz disruptions that have cut Asia's oil supply this year.
A new Saudi crude storage arrangement will put the kingdom's oil on Asia's doorstep. Saudi Arabia and Singapore said on Monday, Oct. 26, that they intend to store Saudi crude in the Jurong Rock Caverns, deep under Singapore's Jurong Island, from the second half of 2027.
What happened
Tan See Leng, Singapore's minister for energy and industry, announced the plan at the start of Singapore International Energy Week. He said Saudi Aramco would sign an MoU on Monday with JTC Corporation and Singapore's Energy Market Authority, with negotiations meant to wrap up in "a few months," Reuters reported via The Star.
The caverns sit about 150 meters underground and can hold up to 1.47 million cubic meters of liquid hydrocarbons such as crude and condensate, The Edge Singapore said. The facility is the first commercial underground rock-cavern store for liquid hydrocarbons in Southeast Asia.
"Bringing supply closer to key Asian markets would strengthen the flexibility of our supply network," Saudi Energy Minister Prince Abdulaziz bin Salman said in a recorded message.
Why it matters
The war with Iran explains the timing. Before the conflict, Asia imported two-thirds of its crude from the Middle East, much of it through the Strait of Hormuz, and those flows have been badly disrupted, according to Reuters. Saudi crude storage in Singapore gives Aramco a buffer it can draw on for Asian refiners when shipping lanes close, and it helps Riyadh defend market share against rival suppliers.
Aramco already uses this model elsewhere. It keeps crude in Okinawa, where capacity was expanded to 8.2 million barrels in 2017 with Japan's state energy agency, and in 2023 it agreed to store 5.3 million barrels at South Korean reserves in Ulsan for five years. In both cases the host government has priority to buy the oil in a shortage.
For Singapore, the deal is part of a broader push. Tan said Singapore will add five power plants from 2026 through 2031, raising generation capacity by 26% from about 12 gigawatts, Mothership reported, and warned that "Singapore will not be able to insulate ourselves from global or regional shocks."
What's next
The arrangement adds no barrels before 2027, so it does little for today's prices. Brent fell about 2% from a six-month high to roughly $114 on Monday as President Trump said it was "getting to be decision time" on Iran, CoinDesk reported. We laid out the price risks in our oil shock long read and in our coverage of Brent's five-month high.
Watch for the signed agreement, volumes and whether Singapore gets first call on the oil in an emergency, as Japan and Korea do. The minister's comments are in The Star's report, and more Saudi crude storage deals in Asia would signal that Hormuz risk is here to stay.
This article is for information only and is not investment advice.