Attacks on commercial vessels in the Red Sea by Houthi rebels in Yemen have left oil tanker operators facing an unsettling calculation: accept the risk of steaming from the danger zone, or lose business.Thank you for reading this post, don't forget to subscribe!
The risk of conflict in the region could escalate further, with a 12-nation coalition led by the United States warning on Wednesday that it will “hold malign actors accountable for unlawful seizures and attacks.”
Despite the attacks and the greater risk, some oil companies insist that the ships they charter take this route rather than circumnavigating Africa, which could require an additional two weeks at a higher cost. Is. Tanker owners can “take it or leave it,” said Henry Cura, head of global research at ship brokering firm Braemar in London.
Oil markets have so far largely avoided drone and missile attacks. Traders estimate there is enough petroleum available worldwide to deal with any supply problems.
“Oil and gas reserves in most major demand centers are relatively healthy, so it looks like disruptions and delays can be met,” said Henning Gloystein, director of energy and climate change at political risk firm Eurasia Group. Also, as global economic growth has slowed, demand for oil has declined.
While some oil companies, including BP, say they are staying out of the region, others are continuing to use the Red Sea, which provides access to European markets via the Suez Canal.
“If we have the capacity, we will avoid crossing the Red Sea,” said Lars H. Barstedt, chief executive of Frontline, a large Oslo-based tanker company. But this is not always possible.
A tanker company, Mr. Barstad said, is just a “taxi service” at the beck and call of customers such as major oil companies and trading firms. Once the voyage has begun, the captain or owner cannot suddenly decide without any solid reason to go around Africa instead of going through the Suez Canal.
To redirect an already underway ship, he said, “it would have to be a war-like situation.” “At the moment it is not a war-like situation – although it may appear so to outsiders.”
Mr Barstad said he thought the chances of any of his ships being targeted by drones or missiles was very low because of the large number of ships still passing through the area. Plus, he said, his company has no recent history of dealing with Israel, making it less of a target for the Houthis, who are allies of Hamas.
They also get some solace from the coalition’s increased naval presence in the region and the presence of armed guards on their ships.
Overall, the flow of oil and refined products such as diesel and gasoline through the Suez Canal dropped by about 40 percent in December compared with October, said Victor Katona, an analyst at Kpler, a company that tracks shipping.
The petroleum industry is slowly adjusting to increasing threats. Some tankers are going around Africa. Others are carrying goods to Asia. Growth in US exports of diesel fuel and other refined products to Europe is helping to offset reduced flows from India and the Middle East.
This fairly smooth transition is one reason the Houthi threat has had so little impact on energy prices. The price of Brent crude, now around $77 a barrel, is slightly lower than when Hamas fighters attacked Israel on October 7, touching off its war in Gaza. At the same time, European natural gas prices have also fallen significantly.
Although the Suez Canal may be important, there are alternatives. The largest crude oil tankers have always stayed away from the canal due to their vastness, and so the current situation does not appear to be changing much. While owners of some liquefied natural gas carriers have decided to temporarily keep their ships away from the Suez Canal, ships from Qatar, a major supplier to Europe, have continued to use the Egyptian route, perhaps anticipating that the Houthis will Will not target any ship owner close to Hamas. As a result, European natural gas prices “have been more impacted by the mild winter so far,” said Laura Page, liquefied natural gas analyst at Kpler.
Shipping industry insiders estimate that Russia, which ships large quantities of oil through the canal, is also likely to be immune to attacks. “Given Russia’s ties to Iran, it’s very unlikely that they will be targeted,” said Jonathan Chappell, senior managing director of surface and maritime transportation equities at Evercore ISI, a New York-based investment bank.
Most of all, what has helped prevent panic is the perception in the markets that the world has abundant oil and natural gas.
“The market is not worried about supply risks,” said Richard Bronze, head of geopolitics at research firm Energy Aspects. “It will take a long time for oil prices to rise again in a sustained manner,” he said.