The oil market appears to be bracing for a weeks-long disruption to shipping in the southern Red Sea, where Houthi militants have for months been attacking merchant vessels in response to Israel’s war in Gaza.
Charters of tankers to haul crude and fuels “- which for some vessels are arranged up to a month in advance “- reveal growing numbers of the vessels are being hired for routes that will avoid the danger zone, according to shipowners, brokers and traders.
Airstrikes in Yemen on January 12 by the US and UK have heightened a sense of chaos for ships in the area, especially after western navies subsequently warned vessels to stay away. With the Houthis pledging to strike back against both nations’ commercial fleets, numerous owners elected to stay away from a route that normally handles about 12 per cent of global seaborne trade.
“More and more owners are avoiding the area,” said Alexander Saverys, Chief Executive Officer of Euronav NV, whose own fleet can transport more than 50 million barrels of oil. “What looked like something that could be solved within weeks, now could indeed have consequences for many months.”
Tankers to move fuel cargoes are instead being hired to sail to Asia instead of Europe, sparking a surge in earnings. At the same time, several Iraqi crude shipments have been booked on tankers that will take a thousands-of-miles detour around Africa.
Danish tanker owner Torm said in a statement that there’s been an increase in voyages to Asia for transporting refined fuels. That has helped pushed earnings on the so-called relatively large tankers that ship oil products from $35,000 a day to $60,000 a day over the past week.
In addition, there’s also been a significant volume of Iraqi crude cargoes booked to sail from the Persian Gulf to Europe around Africa, according to people involved in the market.
Some are jointly loading smaller cargoes onto bigger ships to make the journey more cost-effective, one of the people said. Although crude flows from the Persian Gulf to Europe are less common than ones to Asia, the shipments nevertheless reveal owners’ attitudes to transiting the Red Sea.
Container shipping, where many Houthi attacks had initially been concentrated, had already largely diverted before the US and UK airstrikes. Increasing numbers of tankers and bulk commodity carriers followed suit.
Some crude tanker rates have been climbing too in recent weeks too. Aframax ships that haul about 700,000 barrels more than doubled to hit almost $80,000 a day since the middle of December.
Suezmax ships “- so-called for their ability to sail full through the canal that links Asia and Europe “- are up about 50 per cent to almost $70,000 a day.