BP halts oil tankers passing through Red Sea on deteriorating security

BP became the first international oil major to announce Dec. 18 it had suspended tankers passing through the Red Sea in response to the worsening security situation in the region and repeated attacks by Houthi militants on shipping.

"In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea," the company said in a statement to S&P Global Commodity Insights. "We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region."

The recent surge in attacks on shipping passing through the Bab el-Mandeb strait and the Red Sea has started to move the needle on oil prices. Platts, part of S&P Global Commodity Insights, assessed Dated Brent up at $77.085/b on Dec. 15, up just under 1% on the week. At 1143 GMT on Dec. 18, the ICE February Brent futures contract was up 57 cents/b from the previous close at $76.55/b, while NYMEX January WTI crude was up 46 cents/b to $71.89/b.

European gas prices also rose following news that BP has suspended shipping via the route, with the benchmark Dutch TTF month-ahead price rising by more than 10% to an intraday high of Eur37.50/MWh at 1400 GMT before falling back, according to ICE data. BP's fleet contains a handful of LNG carriers, including the British Achiever, British Contributor, British Partner, British Listener, British Mentor and British Sponsor.

More than 135 crude, oil product, chemical and LNG tankers were seen transiting the Suez Canal and Red Sea midday Dec. 18, of which 85 were laden, according to data from S&P Global vessel tracking service Commodities at Sea. Another 165 dry bulk and cargo vessels were transiting the region of which 108 were laden, the data shows.

BP's decision follows Danish shipping giant AP Moller-Maersk -- which accounts for 15% of the global container freight market -- which suspended voyages passing through the Bab el-Mandeb until further notice last week. Hapag-Lloyd -- which controls 7% of the container market -- also paused traffic through the Red Sea until at least Dec. 18 after one of its ships was attacked by Houthis.

War risk

Despite BP's move, other international oil companies and oil traders contacted by S&P Global on Dec. 18 wouldn't say if they would instruct vessels to avoid the Red Sea. Shell, Glencore and Trafigura all declined to comment on the growing risk to shipping and cargoes in the region. Vitol, Gunvor and Mercuria didn't respond to requests for comment. Suez Canal and Bab al-Mandeb strait accounted for 8.8 million b/d of total oil flows in the first half of 2023, according to the US Energy Information Administration.

In response, the US Defense Secretary Lloyd Austin told reporters Dec. 18 that the world's largest naval power -- which has acted as the de-facto guarantor of regional security and oil transportation from the region since the late 1940s -- was seeking to build a coalition to ensure the Red Sea remains safe for shipping.

"We're going to make sure we're doing everything we can to ensure freedom of navigation in that area [as] a large amount of international commerce flows through there on a daily basis," he said.

The Joint War Committee of Lloyd's of London extended the boundaries of its "Hull War, Piracy, Terrorism and Related Perils" classification over the impacted Red Sea area.

"The Red Sea Listed Area has been extended by 3 degrees north to factor in missile range from Yemen, reflecting a dynamic and evolving situation where ship owners have already shown their awareness of developments with some significant re-routing announced," said Neil Roberts, head of marine and aviation at Lloyd's Market Association.

Iran-backed Houthi militant group has launched a series of attacks of various of types on ships in the Red Sea and Bab al-Mandeb since the Israel-Hamas war broke out Oct. 7, gradually expanding its target list.