Barkah News

 Despite Houthi strikes, oil tankers continue their movements in the Red Sea.

By Arathy Somasekhar and Georgina Mccartney

9:02 PM on January 9, 2024 

January 9, Houston (Reuters) - According to a Reuters study of vessel tracking data, oil and fuel tanker traffic in the Red Sea remained steady in December despite the fact that many container ships had to reroute as a result of strikes by militants affiliated with Iran.

Shippers are still using the vital East-West waterway, thus the attacks have not had the expected impact on oil shipments, despite a substantial increase in insurance premiums and shipping prices. The Houthis, who claim to be targeting ships headed for Israel, have mostly targeted cargoes of non-petroleum items.

Most shippers have not noticed a significant difference in costs thus far because shipping across the Red Sea is still significantly less expensive than shipping around Africa. However, given that some oil corporations, such as BP and Equinor, are rerouting cargo to the lengthier route, the situation is worth monitoring. Additionally, experts predicted that higher shipping costs would encourage the export of US petroleum to certain European customers.

"We haven't really seen the disruption to tanker traffic that everyone was anticipating," Lloyd's List shipping expert Michelle Wiese Bockmann stated.

December saw an average of 76 oil and fuel ships per day in the south Red Sea and the Gulf of Aden, the attack-prone region near Yemen. According to data from ship tracking service MariTrace, that was only three below the average for the first eleven months of 2023 and only two less than the average for November.

rival monitoring service In the whole Red Sea and Gulf of Aden, Kpler tracked 236 ships on average every day in December, which is marginally more than the 230 daily average in November.

Deliveries of oil would be less profitable if ships had to sail around the Cape of Good Hope off Africa instead of the Red Sea, she added due to the extra expense.

You're going to attempt to pass, she said.

According to statistics from ship analytics company Marhelm, chartering rates have nearly doubled since the beginning of December. Suezmax tankers, which can transport up to a million barrels of oil, can cost as much as $85,000 each day to transport oil. Aframax ships cost $75,000 per day and have a capacity of 750,000 barrels.

According to MariTrace, tanker traffic in the southern Red Sea region temporarily decreased between December 18 and December 22, when the Houthi group increased its attacks on vessels, targeting an average of 66 tankers. However, tanker traffic then resumed.

According to MariTrace, container ship traffic in the region declined more precipitously in December, falling 28% from November to December, with particularly steep drops in the second half of the month as attacks increased.

"STILL TAKING THE RISK"

An analysis of LSEG data indicates that a number of oil companies, refiners, and trading institutions have persisted in using the Red Sea route.

"The last thing shippers and their clients want is for their schedules to be interrupted. Thus, they continue to assume the risk," Marhelm's creator, Calvin Froedge, remarked.

He pointed out that the Houthis have no interest in striking the Russian crude that many oil tankers passing through the Red Sea were transporting to India.

LSEG's ship tracker indicates that the Delta Poseidon, chartered by Chevron, passed via the Red Sea and Suez Canal on its way to Singapore at the end of December. According to data, the Indian refiner Reliance chartered the Sanmar Sarod, which traveled across the Red Sea in late December to bring gasoline components to the United States.

The oil giant "will continue to actively assess the safety of routes in the Red Sea and throughout the Middle East and make decisions based on the latest developments," according to a spokesperson.

An inquiry for comment from Reliance was not answered.

In recent weeks, other tankers chartered by the Indian refiner Bharat Petroleum, the Saudi Arabian Aramco Trading Company, and the trading company Gunvor's Clearlake unit have all traveled the route. The businesses either did not respond to requests for remarks or declined to speak.

One can save around 3,700 nautical miles on a trip from Singapore to Gibraltar by using the Red Sea.

MODIFYING FLOWS

Certain firms, like BP and Equinor, have stopped all of their vessel transits across the Red Sea and have redirected them within the region.

According to ship tracking firm Vortexa, since the second half of December, at least 32 tankers have bypassed the Suez Canal and instead traveled around the Cape of Good Hope.

According to Vortexa, the majority of the tankers that are diverting are either those run by US or Israel-affiliated organizations or those chartered by businesses who declared a halt to their Red Sea shipping.

While the East of Suez is currently well supplied, fuel oil dealers and bunkering sources in Asia stated they were closely observing developments in the Red Sea and that the present diversions are unlikely to drive up prices.

According to Kpler data, east-to-west interruptions have primarily affected European imports of jet fuel and diesel thus far. According to Kpler statistics, however, some European fuel oil and gasoline supplies to the Middle East, Asia-Pacific, and East Africa have been impacted by west to east diversions.

According to Matt Smith, an analyst at ship tracking company Kpler, tensions there have also led more oil buyers to turn to the United States and probably contributed to the record 2.3 million barrels per day of crude exports to Europe in December.

"Ongoing uncertainty in the Red Sea is likely spurring on some modicum of European buying (of U.S. crude)," Smith stated.

Editing by David Gregorio; additional reporting by Robert Harvey in London; reporting by Georgina McCartney and Arathy Somasekhar in Houston

Source reuters.com