2024-01-20 14:05:38
The existing structure of the global benchmark Brent crude futures market, as well as some spot markets in Europe and Africa, has been reflecting tight oil supplies, in part because of concerns about ships avoiding the waters of the Red Sea due to missile and drone attacks. , resulting in transportation delays.
The disruptions, the worst blow to global trade since the coronavirus pandemic, combined with other factors such as growing demand from China, have intensified competition for crude supplies that do not have to go through the Suez Canal, which analysts say is The performance is most obvious in the European market.
In a sign of tight supplies, the market structure for Brent crude, which accounts for nearly 80% of globally traded oil, reached its most bullish levels in two months on Friday following recent US and UK attacks on targets in Yemen. , the tanker’s route began to divert from the Red Sea.
In response to Israel’s war on Gaza, the Iran-aligned Houthi rebel group that controls northern Yemen and its western coastline has launched a wave of attacks on ships in the Red Sea.
economy
Alternative shipping routes that avoid the Red Sea
Attacks by the Yemeni Houthi armed group in the Red Sea disrupted shipping activities through the Suez Canal and Bab el-Mandeb Strait (Al Jazeera)
By attacking ships with ties to Israel, the Houthis are trying to force Tel Aviv to end the war in Gaza and allow humanitarian aid to enter the Gaza Strip.
So far, the Houthis’ activities have been mainly concentrated in the narrow Bab el-Mandeb Strait that connects the Gulf of Aden to the Red Sea. About 50 ships pass through the strait every day and pass through the Suez Canal, the central artery of global trade.
Some of the world’s largest shipping lines have suspended transit activity in the region and forced their ships to detour around the Cape of Good Hope at Africa’s southern tip. The time and freight costs of using this route will rise due to higher fuel, crew and insurance costs.
Victor Katona, chief crude oil analyst at shipping intelligence company Kpler, told Reuters, “In terms of the disruption of the Red Sea-Suez Canal route, Brent crude oil is the most affected futures contract.” “So who is affected? What’s the biggest impact? Without a doubt, it’s the European refiners.”
On Friday, the premium for the first-month Brent contract relative to the six-month contract rose to $2.15 a barrel, the highest level since early November last year. This structure is known as backwardation, and it signals a belief that supply will be tight when delivery comes.
red sea waters
Oil flows to Europe fall
Data provided by Kpler shows that the amount of Middle Eastern crude shipped to Europe has declined, with output in December falling to about 570,000 barrels per day from almost 1.07 million barrels per day in October.
Ships passing through the Suez Canal have taken on greater strategic importance since the war in Ukraine began, as sanctions on Russia have made Europe more dependent on oil from the Middle East, which accounts for three-thirds of the world’s Brent supplies. one part.
But one crude oil trader told Reuters that measuring the impact on Red Sea shipping alone was challenging. “There are strong markets everywhere, but people are very nervous.”
Other developments have also tightened crude markets in Europe, including a drop in supplies from Libya due to protests – the first such disruption in months – and a drop in exports from Nigeria.
Angolan crude, which can be shipped to Europe without passing through the Suez Canal, has also seen higher demand from China and India due to some issues faced by Iranian and Russian crude. In this case, this type of crude oil also reduces the supply that may enter Europe.
Oil trade with China has stalled as Iran withholds shipments and demands higher prices, while India’s crude imports from Russia have also fallen amid currency challenges, although India blames the drop on prices loses appeal.
At the same time, data released on Saturday showed that Russia will surpass Saudi Arabia in 2023 and become China’s largest crude oil supplier. As the world’s largest crude oil importer, China purchases large amounts of discounted oil for its processing plants.
Chinese customs data shows that last year, Russia exported 107.02 million tons of crude oil to China, a record high, equivalent to 2.14 million barrels per day, much higher than the output imported from other major oil exporting countries such as Saudi Arabia and Iraq.
Against this background, China’s previous largest crude oil supplier, Saudi Arabia, lost a certain market share, and its imports fell by 1.8% to 85.96 million tons.
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