The Southern Red Sea Faces Prolonged Shipping Disruption in Wake of Houthi Attacks
The oil market is anticipating extended chaos in the southern Red Sea, as Houthi militants continue their attacks on merchant vessels in response to Israel’s conflict in Gaza. Charters for tankers, arranged well in advance, indicate a growing trend of vessels being hired for alternative routes to bypass the danger zone, according to industry insiders.
Recent airstrikes in Yemen by the US and UK on January 12 have heightened the sense of uncertainty for ships in the area. Western navies’ warnings to vessels to stay away, coupled with Houthi threats against commercial fleets, have led many shipowners to divert from a route that typically handles approximately 12% of global seaborne trade.
Alexander Saverys, CEO of Euronav NV, notes, “More and more owners are avoiding the area.” What initially seemed like a situation that could be resolved in weeks now has potential consequences lasting for months.
As a result, tankers originally designated for fuel cargoes to Europe are now being rerouted to Asia, leading to a surge in earnings. Simultaneously, Iraqi crude shipments are taking longer detours around Africa. Danish tanker owner Torm reports an uptick in voyages to Asia for transporting refined fuels, pushing earnings on large oil product tankers from $35,000 to $60,000 a day over the past week.
Additionally, there is a notable increase in Iraqi crude cargoes being booked for the longer journey from the Persian Gulf to Europe around Africa. Some shipments involve joint loading of smaller cargoes onto larger ships to optimize cost-effectiveness.
Container shipping, initially the focus of Houthi attacks, had already diverted routes before the recent airstrikes. This trend is now extending to tankers and bulk commodity carriers, impacting crude tanker rates in recent weeks.
Aframax ships, capable of carrying about 700,000 barrels, have more than doubled, reaching almost $80,000 a day since mid-December. Suezmax ships, known for their ability to navigate the canal connecting Asia and Europe, have risen by about 50%, reaching almost $70,000 a day.
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