Amid supply shortages in Europe…the oil market is preparing for continued tension in the Red Sea Economy

The oil market is preparing for additional weeks of disruption Sea shipping south The Red Seawhere you attack Houthi group Since last November, Yemeni commercial ships have been marooned in retaliation for the Israeli aggression against Gaza stripaccording to Bloomberg.

Avoid danger areas

The chartering of oil and fuel tankers, which is arranged for some ships up to a month in advance, is revealing an increasing number of ships being chartered on routes that avoid the danger zone, according to ship owners, brokers and traders.

The air strikes launched by the United States and the United Kingdom in Yemen on January 12 increased the sense of chaos among ships in the region, especially after Western naval forces later warned ships to stay away from the southern Red Sea, and with the Houthis vowing to respond to the fleets. Trade for both countries In addition to Israeli ships, many owners chose to stay away from the route through which about 12% of global seaborne trade usually passes.

The Houthis say they only target Israeli ships passing through the Red Sea or heading to Israel, but the United States called for the creation of a coalition with a war it called “Guardian of prosperityTo protect “trade across the Red Sea,” but it later resorted to launching direct attacks on Yemeni targets.

Bloomberg quoted Alexander Saveris, CEO of Euronav Nevada, which has a capacity to transport more than 50 million barrels of oil, that more ship-owning companies are avoiding the region, which he expected to have consequences that will extend for several months, after it seemed as if… Something that could be resolved within weeks.

According to the agency, the tankers that are chartered have to sail to Asia instead of Europe, which has led to a significant increase in their profits. At the same time, many shipments of Iraqi crude oil have been booked on board tankers that will travel thousands of miles around Africa.

High profits

Bloomberg quoted the owner of the Danish tanker “Torm” in a statement, saying that there is an increase in flights to Asia to transport refined fuel. This helped raise the profits of relatively large oil product tankers, from $35,000 per day to $60,000 per day during the past week.

According to market sources, the agency reported that there was a large volume of Iraqi crude oil shipments that had been booked to sail from the Arabian Gulf to Europe around Africa. It quoted a source as saying that some are jointly loading smaller cargoes onto larger ships to make the journey more cost-effective.

Although oil flows from the Gulf to Europe are less than flows to Asia, the shipments reveal the attitudes of their owners towards crossing the Red Sea, according to the agency.

Shortage in Europe

In this context, Reuters quoted data from the London Stock Exchange Group, traders and analysts, saying that the Brent crude market and some oil markets in Europe and Africa are witnessing a shortage due, in part, to delayed shipments after some cargo ships avoided traveling through the Red Sea.

The disruption coincided with other factors, including interruptions in production and increased demand in China, intensifying competition for crude supplies that do not need to cross the Suez Canal. Analysts say that the crisis is clearer in European markets, according to the agency.

In a sign of supply shortages, the structure of the futures market for benchmark Brent crude reached its highest levels in two months yesterday, with tankers turning away from the Red Sea after air strikes launched by the United States and Britain on targets in Yemen.

Raw materials contracts

Kpler’s chief crude oil market analyst, Victor Katona, said that Brent crude futures contracts are most affected by the disturbances in the Red Sea and…Suez CanalTherefore, European refiners are the ones who suffer most in the actual markets.

The premium for the one-month Brent crude contract compared to the 6-month contract rose to $2.15 per barrel yesterday, the highest level since early November, which indicates a decline in supply.

US crude contracts took a trend similar to Brent contracts, albeit to a lesser degree, which indicates an imminent decline in supply.

In the (European) North Sea crude market, the difference between Forties crude contracts and the standard Brent crude reached its highest levels since late November, and the prices of some other grades of crude that are considered a local alternative to Middle Eastern crude also rose.

The price of Norwegian Johan Sverdrup crude – an alternative to medium-sour Middle East crude – began jumping in December, and continued to rise in January, trading at a premium of $2.80 over dated Brent crude, up from a discount of more than $2 before the sea disturbances. the Red.

Reuters quoted trade sources as saying that the high demand for Johan Sverdrup crude may be at least partly related to concerns about delaying the arrival of Middle Eastern crudes to Europe.

Red Sea disturbances

The quantities of crude heading from the Middle East to Europe decreased, as Kpler data shows that the volume of crude heading to Europe from the Middle East decreased by almost half, recording about 570 thousand barrels per day in December from 1.07 million barrels per day in October.

The agency quoted a trader as saying that problems in the Red Sea are causing delays. Therefore, refining companies need to cover their needs from local markets, and another added that the market is suffering from a shortage due to the loss of Gulf supplies.

In Asia, the average spot premiums for the Middle East, Dubai, Oman and Murban oil crude oils rebounded, partly supported by fears of supply disruptions, while US crude oil price differentials have not yet shown any impact and are trading within this year’s range.

Azerbaijani light crude, which is produced in the Caspian Sea and sold to Europe, the United States and Asia, jumped to more than $6 above Brent crude, which would be the highest since September, according to data from the London Stock Exchange Group.

Other developments led to a shortage in European supplies, including a decline in Libyan supplies due to protests, the first disruption of its kind in months, as well as a decline in Nigerian exports.

Crude supplies from Nigeria decreased after the country started operating the Dangote refinery, which took over some cargoes.

A trader said that Angolan crude, which is also heading to Europe without the need to pass through the Suez Canal, is witnessing increasing demand from China and India due to problems related to Iranian and Russian crude oil.

Chinese oil trade with Iran faltered due to Tehran stopping shipments and demanding higher prices, while India’s imports of Russian crude declined due to currency challenges, although India says the decline is due to unattractive prices.