- Longer travel times and increased costs due to Red Sea attacks impact global oil trading, affecting shipments of naphtha and diesel.
- The opportunity emerges for U.S. refiners to fill the supply gap in Europe, while shippers face complexities in managing prices, routes, and risks.
Red Sea Disruptions Escalate Costs and Challenges
The supertanker Grand Bonanza’s deviation around Africa to avoid the Red Sea showcases the impact of Houthi attacks on shipping. Estimated at $5.7 million, the journey costs nearly 80% more and takes two weeks longer than the Suez Canal route. Attacks on Red Sea shipping, primarily affecting containers, now affect global oil trading and escalate prices.
Pricing Pressures and Complex Route Adjustments
The recent strike on a Trafigura-chartered fuel tanker highlights the risk, prompting energy producers and traders to assess longer voyages around the Cape of Good Hope. Shippers revise routes, refueling points, and increase cruising speeds, leading to higher fuel consumption and emissions. European refiners grapple with increased shipping times raising crude costs but benefit from decreased competing product imports.
Opportunities and Challenges for U.S. Refiners
U.S. refiners find opportunities to send fuel products to Europe, replacing West Asian supply, similar to their strategy with natural gas after the Ukraine invasion. Rising freight and insurance costs constrain diesel and jet fuel shipments from Asia and West Asia to Europe. European refiners face rising import costs for Basrah oil, affecting demand in Q1, while the market sees a potential east/west split in oil trading.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: The Hindu
