A The renewed increase in transit times is increasing global oil flows, leading to higher oil tanker rates. In its latest weekly report, Gibson Shipbroker said: “With the Houthis announcing a full naval blockade specifically against Saudi Arabia on July 20 and threatening any ship calling at Saudi ports, the southern Red Sea faces heightened security risks. Within days of the announcement, the Houthis claimed that strikes on two tankers had effectively crippled Yanbu’s direct exports to the east via the Bab al-Mandab. Since the Hormuz outage began, Saudi Arabia has pushed crude oil west via the Bab al-Mandab. The East-to-Bab pipeline. West to Yanbu, maintaining export volumes at around 3.5-4.0 million barrels per day after the withdrawal of local refineries, with almost all of it destined for Asia. With the direct southern route largely closed, Yanbu barrels bound for Asia are forced to head north towards the Suez Canal and/or the SUMED pipeline before embarking on an extensive diversion around the Cape of Good Hope (COGH). Short loading at Yanbu or partial unloading at Ain Sokhna increases cost and transit time and there is an alternative transshipment strategy Two ships via Sumed avoid these restrictions, but the 2.5 million barrels per day pipeline has limited spare space to handle such an influx, while operating the Red Sea shuttle relying on a small batch of dedicated units to extract crude oil directly from existing storage at Sidi Kerir – where the stock is said to be around 15 million barrels – provides a temporary solution, although this still leaves charterers facing an extended route to reach Asian buyers.
Source: Gibson Shipbrokers
According to Gibson, “This routing friction is exacerbated by the severe vessel positioning deficit across both major crude oil sectors. Getting VLCCs from the Mediterranean/Atlantic to reach Yanbu represents an immediate bottleneck, as West of Suez ballast availability is only 74 units, roughly 10% of the VLCC fleet. A short-term shortage of VLCCs able to reach Yanbu on time appears likely, which could lead to PUSHING FREIGHT Charterers could alternatively switch to Suez Maxes, which can transit the Suez Canal fully loaded, but this reduces loading efficiency at Yanbu and loses economies of scale. Moreover, while most Suez Maxes are concentrated in the west and could theoretically turn towards the Red Sea quickly, demand in the Atlantic Basin has been exceptionally strong this year, and pulling Suezmaxes away from western trade to its location at Yanbu could tighten effective fleet supplies in the Atlantic if barrels become available. Originating further in the Mediterranean, CPC’s pipeline was recently suspended following attacks on tankers in the Black Sea, further complicating the picture, as Europe will need replacement barrels.
“If the rerouting materializes, total tonne-mile demand for crude oil will receive a significant boost. The Yanbu-Suez-Cape of Good Hope-Ningbo route is approximately 15,257 nautical miles – nearly 130% longer than the usual route. If all eastbound Yanbu crude volumes are rerouted via Suez and the Cape of Good Hope, the loss of stranded Middle Eastern barrels could be offset, resulting in net monthly growth of about 2%,” Gibson added. Some cargo can still be transported via Bab el-Mandeb or on short-haul flights to Europe instead.
Meanwhile, “despite these increasing logistical hurdles and shipping costs close to doubling, a structural shift in Asian crude oil trade flows away from Saudi oil remains unlikely, as the severe supply crunch across the wider Persian Gulf leaves Asian refiners no choice but to absorb additional shipping costs. Typical freight between East Yanbu on VLCCs, recently valued at mid to high $5 per barrel, is expected to rise to mid to high $9 per barrel across Suez and COGH. This assumes that shipping rates are roughly constant. However, there is a clear upside risk to this figure: the Houthis’ reach would likely extend to Yanbu itself and any escalation would likely require a war risk premium.
Gibson also noted, “On the refined products side, exports from Yanbu and Jizan moving west have averaged about 560,000 b/d so far this year. However, with the direct southern route now closed, a significant shift in trade flow is expected, with clean volumes at Yanbu and Jizan redirected towards Europe and the Mediterranean via Suez. This leaves East/Africa particularly vulnerable, given that nearly half of its clean product imports come from Yanbu and Jizan.” While swing suppliers such as India’s west coast and Pakistan’s Duqm region usually fill this last short and weak gap, the economics of east-west arbitrage have kept Indian and Omani oil strongly eastward towards Asia, leaving little uncommitted volume to cover the African deficit and as a result, East Africa will be forced to either absorb huge freight premiums to pull the Yanbu/Jizan product via the COGH route, or actively bid for longer-haul cargo from the Atlantic Basin to block. gap.
“Overall, complex choke point restrictions represent another layer of operational friction, inflating shipping costs, lengthening transit times, and putting pressure on global oil flows. In the short term, these dynamics are clearly positive for tanker profits,” Gibson concluded.
Nikos Rousanoglou, Global Hellenic Shipping News
