Attacks on merchant ships in the Red Sea by Houthi rebels in Yemen have left oil tanker operators facing an unpleasant reckoning: accept the risks of steaming through the danger zone or lose business.
A 12-nation alliance led by the United States warned on Wednesday that risks of conflict in the region may be on the rise.Hold bad actors accountable for illegal seizures and attacks.
Despite the attacks and the high risks, some oil companies insist that the vessels they charter take this route instead of cruising around Africa, which would require an extra two weeks at a higher cost. Tanker owners can “take it or leave it,” said Henry Currah, head of global research at Bremer, a London-based shipbroker.
Oil markets have so far largely shrugged off drone and missile strikes. Traders believe there is enough petroleum on hand around the world to deal with any supply problems.
“Oil and gas inventories in most major demand centers are relatively healthy, so there is a sense that disruptions and delays can be minimized,” said Henning Glostein, director of energy and climate change at political risk firm Eurasia Group. Also, as global economic growth has slowed down, demand for oil has fallen.
While some oil companies, including BP, have said they are pulling out of the region, others continue to use the Red Sea, which provides access to European markets through the Suez Canal.
Lars H., chief executive of Frontline, a major tanker company in Oslo. Barstad said, “If we have the capacity, we will avoid red sea smuggling.” But that is not always possible.
A tanker company, Mr. Barstad called it a “taxi service” on call from clients such as major oil companies and trading companies. Once the voyage has begun, the captain or owner cannot suddenly decide to go around Africa instead of going through the Suez Canal without a strong reason.
“It has to be a war-like situation,” he said, to divert a ship already underway. “It's not a belligerent situation right now — even if it looks that way to outsiders.”
Mr. Barstad said the chances of one of his ships being targeted by drones or missiles are extremely low because so many ships still pass through the area. He also said his company had no recent history of dealing with Israel, which would reduce the targeting of Hamas's allies, the Houthis.
He finds some comfort in the alliance's growing naval presence in the region and the presence of armed guards on his ships.
overall, The flow of oil and refined products such as diesel and gasoline through the Suez Canal fell 40 percent in December compared with October, said Victor Katona, an analyst at shipping tracking firm Kpler.
The petroleum industry is gradually sliding towards higher risks. Some tankers are sailing around Africa. Others carry cargo to Asia. A surge in US exports of diesel fuel and other refined products is helping Europe offset lower flows from India and the Middle East.
That fairly smooth transition is one reason the Houthi threat has had little impact on energy prices. The price of Brent crude oil is now $77 a barrel, slightly lower than it was when Hamas militants burst into Israel on Oct. 7, which touched off its war in Gaza. At the same time, European natural gas prices have also fallen significantly.
Although the Suez Canal is important, there are alternatives. Large crude oil tankers always tend to stay away from the canal. Although the owners of some liquefied natural gas carriers have decided to temporarily keep their ships out of the Suez Canal, those from Qatar, Europe's main supplier, continue to use the Egyptian route, perhaps assuming the Houthis won't target a ship owner. Close to Hamas. As a result, European natural gas prices “have been weighed down by a mild winter so far,” said Laura Page, liquefied natural gas analyst at Kpler.
Shipping industry experts believe 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 highly unlikely that they will be targeted,” said Jonathan Chappell, senior managing director of surface and marine transportation equities at Evercore ISI, an investment bank in New York.
After all, helping to stave off panic is a sense in the markets that the world has plenty of oil and natural gas.
“The market is not worried about supply risks,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm. “It will take a lot to re-establish a sustained rally” in oil prices, he said.