Following Iran’s decision to lob missiles at US-Iraqi bases last night, several major tanker operators have suspended sailing through the Straits of Hormuz, the site of several tanker attacks last year.
Petrobras, Bahri – Saudi Arabia’s state-run tanker operator – and other tanker companies have suspended sailing through the Straits of Hormuz, WSJ reports, citing unidentified people familiar with the matter.
Meanwhile, Gulf officials are already trying to convince the world that there’s nothing to worry about in what’s essentially a tinderbox inside another tinderbox. United Arab Emirates’ Energy Minister Suhail al-Mazrouei said on Wednesday he saw no immediate risk to oil passing through the critical gateway through which 20% of the global supply of crude travels. al-Mazrouei made the comments on the sidelines of a conference in Abu Dhabi, the UAE capital.
The source of their concerns is clear: Iran carried out its “retaliation” for the killing of General Suleimani last night – though the Pentagon has confirmed that there have been no American casualties from Iran’s strikes. However, many fear that Iran isn’t finished with its retaliation.
Mazrouei added that OPEC was not discussing any precautionary steps at the moment, but would re-evaluate the situation if a supply shortage emerged, according to Reuters. He said earlier that the global oil market was well supplied.
Oil prices initially moved higher after last night’s attacks, but prices have since settled, and the market largely ignored the news about the tanker suspensions, as it was already largely priced in.
On Tuesday, Washington warned about “the possibility of Iranian action against US maritime interests” in the Middle East.
“U.S. commercial vessels are advised to exercise caution and coordinate vessel voyage planning for transits of the Persian Gulf and nearby waterways,” the U.S. Maritime Administration said in a statement on its website.
UK Defense Secretary Ben Wallace over the weekend sent two warships to the Strait of Hormuz to prevent attacks on British-flagged tankers.
The cancellations mark an apparent about face after WSJ reported earlier on Tuesday that tanker operators in the region didn’t expect their ships to be targeted in the near term as part of any tit-for-tat escalation between Iran and the US.
“The Middle East is like a powder keg, but we don’t expect any attacks on tankers, at least for now,” said an executive at a Europe-based operator of more than two dozen tankers. “We’ve had some verbal assurances [from Iran] that ships won’t be hit, so we keep our fingers crossed.”
It’s understandable that the industry is on edge: Ship insurers have already paid out more than $100 million in compensation over last year’s attacks. Meanwhile, daily tanker freight rates soared in September from $18,500 to more than $200,000 after Trump slapped sanctions on tankers run by a unit of Chinese state-owned Cosco Shipping Energy Transportation Co., one of the world’s largest tanker companies, for allegedly violating sanctions.
Freight rates have since settled between $80,000 and $120,000, depending on the ship. But with the region set to remain turbulent, analysts expect rates to remain “elevated” for the foreseeable future.