Ex-Middle East tanker freight shrugs off regional military escalation

Loading demand rather than a largely unchanged risk profile is driving tanker freight rates from the Middle East, which have shown little reaction to the latest ramp-up in hostilities between Israel and its adversaries.

Two merchant vessels sustained damage in the Red Sea while another vessel was hit in the Indian Ocean Oct. 1 in the first attacks by Iran-backed Houthi militants for a month, amid Israel’s invasion of Lebanon and a ballistic missile attack on Israel by Iran. Attacks have caused vessels to redirect in droves from the Red Sea route between East and West to the longer voyage via the Cape of Good Hope since the end of 2023.

Platts, part of S&P Global Commodity Insights, assessed the rate to carry a 40,000-metric ton cargo of refined products on a Medium Range tanker from the Persian Gulf to UK-Continent at $46.13/t Oct. 2, having declined steadily from $50.5/t on Sept. 30. Platts assessed the rate to carry a 140,000-metric ton cargo of crude on the same route at $23.64/t, up negligible steps from $23.39/t Sept. 30.

Shipowners definitely will be monitoring the latest developments as tensions have risen in recent days, Yen Ling Song, associate director for crude and products flows at Commodity Insights, said. "Maritime security remains a key concern and there could be a premium added there but overall rates are still underpinned by loading demand and that supply picture hasn’t changed," Song added.

In the week started Sept. 23, 14.9 million b/d of crude and dirty products were loaded in the Middle East Gulf, down from 17.9 million b/d the previous week but level with the week before that, according to data from S&P Global Commodities at Sea. During the same week, 5 million b/d of clean products were loaded, down from 5.5 million b/d the previous week but again level with the preceding week, CAS data showed.

The attacks on the Cordelia Moon and Minoan Courage were the first attacks by Yemen’s Houthi rebels on commercial vessels in a month, the longest period of inactivity since attacks began at the end of 2023, but they were commensurate with the established risk profile of the region, Munro Anderson, head of operations at marine war risk and insurance specialist Vessel Protect, part of Pen Underwriting, told Commodity Insights.

However, the risks could grow from here, Anderson said: "From a marine war risk assessment perspective, there is a significant degree of intent remaining on the part of the Houthis and their Iranian sponsors, despite the recent reduced activity." Furthermore, this period has "almost certainly" led to a consolidation and resupply of resources, he added.

Oil analysts are scrutinizing the signals from the region. Potential additional declines in Red Sea oil flows and additional redirection could temporarily boost oil prices by reducing inventories on land, analysts at Goldman Sachs said Oct. 2. An unlikely interruption of trade through the Strait of Hormuz and a large oil price spike would also disrupt supplies to the global market, they added.

Platts assessed Dated Brent at $75.38/b Oct. 1, it has risen since $71.98/b Sept. 27.