In response to escalating security risks in the Red Sea, major oil producers and tanker operators are taking precautionary measures, diverting shipments and rerouting vessels. Trade sources reveal that companies such as Shell, ADNOC, and Reliance Industries are among those actively avoiding the Red Sea region, says an article published on sp global website.
Summary
- Major oil producers and tanker operators are diverting shipments and rerouting vessels due to escalating security risks in the Red Sea.
- Companies such as Shell, ADNOC, and Reliance Industries are actively avoiding the Red Sea region.
- Indian refiner Reliance Industries has reportedly loaded no products for export to Europe in the first two weeks of January.
- Abu Dhabi state-owned ADNOC has halted voyages through the Red Sea.
- Denmark’s Torm and Shell are rerouting vessels around the Cape of Good Hope at the southern tip of Africa.
- The decision by these companies comes after Houthi attacks on a bulk carrier vessel on January 16.
- BP had previously announced the suspension of tanker voyages through the region on December 18.
Reliance Industries And ADNOC Altering Course
Indian refiner Reliance Industries, a significant diesel and gasoil supplier to Europe, has reportedly loaded no products for export to the continent in the first two weeks of January. Similarly, Abu Dhabi state-owned ADNOC has halted voyages through the Red Sea, according to S&P Global Commodities at Sea data.
Tanker Operators Changing Routes
Denmark’s Torm and Shell are also taking precautionary measures, with tanker operators rerouting vessels around the Cape of Good Hope at the southern tip of Africa. Shell has reportedly suspended all shipments through the Red Sea, according to a Wall Street Journal report.
Security Concerns Escalate After Houthi Attacks
The decision by these companies comes in the wake of heightened security concerns following Houthi attacks on a bulk carrier vessel on January 16. The Zografia, a Maltese-flagged bulk carrier, was targeted by an anti-ship ballistic missile originating from Yemen. While the vessel remained seaworthy, the incident adds to the nearly 30 maritime attacks attributed to Houthi militia since November.
Growing Number Of Suspended Voyages
BP had previously announced the suspension of tanker voyages through the region on December 18. However, rising tensions and increased Houthi attacks have led major industry players to suspend voyages in growing numbers. The decisions often remain at the discretion of ship owners, as formal stances on tanker routes are yet to be adopted by many oil majors and tanker owners.
Impact On Oil Market And Freight Costs
The diversion of ships around the southern tip of Africa is expected to add approximately two weeks to journey times. This slump in tanker transits not only raises concerns about the oil market’s ability to offset bullish pressure from Red Sea tensions but also puts pressure on freight costs.
Commercial Ship Transits And Industry Responses
While some oil majors like Chevron continue to assess the safety of Red Sea routes actively, others remain tight-lipped on their intentions to rethink supply routes. The number of commercial ships transiting key straits, such as the Bab al-Mandab Strait, fluctuates, reflecting the dynamic security situation in the region.
Challenges For Supply Chain And Market Dynamics
Analysts caution that low inventories and a heavy U.S. refinery maintenance season, combined with disruptions in East of Suez flows, could impact supplies. Diesel and gasoil stocks are already below the five-year average, contributing to a tighter balance in the market. Despite weak demand and stable product arrivals from the U.S. into Europe, the situation raises concerns about potential supply pressures.
Market Reaction And Future Outlook
In response to news of rising diversions, M1 ICE LS Gasoil futures climbed 1.89%, reaching $794.75/b by 16:30 GMT. As industry giants closely monitor the situation and assess safety measures, the evolving geopolitical landscape continues to shape the outlook for oil supply routes and market dynamics.
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Source: sp global
