Commodities
War Cover Withdrawal From Insurers to Force 30-Day Detour for Saudi Crude Tankers, Sparta Says
The reported withdrawal of war cover by major insurers for Saudi-linked vessels through the Bab el-Mandeb Strait amid the Houthis threat could force a 30-day detour for crude shipments from the kingdom, Sparta Commodities said in an update on Monday.According to a Financial Times report last week, major insurers have sharply cut premiums for upstream oil and gas insurance outside the Middle East, with some accepting rates below breakeven as they compete for business and anticipate stronger exploration activity beyond the region."In order to keep the oil flowing, Yanbu barrels would need to reroute north up the Red Sea," Sparta analyst June Goh said.If loaded on a very large crude carrier, the vessel would require a partial unloading at Ain Sukhna via the 2.5 million barrels per day Sumed pipeline, transit the Suez Canal at a reduced draft, and reload the remaining cargo at Sidi Kerir, Goh said.Another alternative would be to load crude from the Red Sea port of Yanbu on to Suezmaxes for transit through the Suez Canal and then opt for a ship-to-ship transfer north of Suez onto a VLCC if needed, the note said. "Thereafter the vessels will need to travel from the Mediterranean sea and detour round the Cape of Good Hope to get into Asia, which takes about 30 days more than the direct route, incur higher freight, working capital and handling costs," Goh said.The growing nervousness among Northeast Asian refiners due to the effective closure of the Strait of Hormuz and the rising Bab el-Mandeb security threats is highlighted by market speculation of South Korea leasing a VLCC from Sidi Kerir, Sparta said.While there appears to be ample supply of Western African crude with China staying away from purchases, its quality is not compatible for Korean and Japanese players, it added.A Saudi oil carrying supertanker and heading towards Asia crossed the Red Sea using the longer Suez Canal route amidst the Saudi threats, with another Asia-bound supertanker loaded with crude from Yanbu looks set to follow suit, Bloomberg reported Monday.Maritime traffic through the Bab el-Mandeb strait dipped, with only 11 commodity vessels transiting through the strait on Sunday to hit multi-month lows, Reuters reported Monday, citing Kpler's shipping data.Meanwhile, ship traffic through the Strait of Hormuz remained low too during the weekend, with the passage of less than 10 commodity vessels, the report said.