Oil tanker insurance costs to jump after Gulf attacks
A so-called “additional premium” that owners pay when sailing to the Persian Gulf is likely to rise with immediate effect.
(Bloomberg) — The cost of insuring tankers to ship Middle East crude looks set to jump after a second spate of attacks on vessels in the region in just over a month underscored escalating tensions in the oil-exporting region.
A so-called “additional premium” that owners pay when sailing to the Persian Gulf is likely to rise with immediate effect, the Hellenic War Risks Club, an insurer, said in a notice on its website. Two oil tankers were attacked in the Gulf of Oman, just 32 days after four other carriers were targeted nearby. The region was designated as a listed area after those incidents, a classification that gives underwriters room to charge more.
Nobody has so far taken responsibility for the incidents, which happened near the Strait of Hormuz, the world’s most important oil chokepoint, handling about 35% of the global seaborne trade. The U.S. suggested that Iran, which is under tough American sanctions, was linked to last month’s attacks.
Some owners appear to be “taking a breather” when it comes to accepting charters from the Middle East while they evaluate the risks of lifting oil from the region, according to Halvor Ellefsen, a shipbroker at Fearnleys in London.
Shipping companies should consider diverting vessels from the area where the two vessels were attacked, industry group BIMCO, the largest international shipping association for owners, said in a security advisory to its members. Tensions in the Strait and the Gulf are now at the highest they can be without an actual armed conflict, the group said in a separate statement.
Intertanko, the biggest trade organization for oil tanker owners, said it is “extremely worried” about the safety of crews in the region. It also said two of its members suffered explosions at or below the water line in what the group described as an attack.
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Rare disruptions
Escalations that disrupt Middle East oil supplies are relatively rare. The Iran-Iraq war coincided with a big slump in OPEC oil output in the first half of the 1980s. That conflict saw tankers destroyed as the two countries tried to damage one another’s economies.
By contrast, Iraq’s 1990 invasion of Kuwait, and the Gulf War that followed, were a long way from Hormuz and had a relatively small impact on flows through the Strait, with Saudi Arabia replacing much of the lost Iraqi and Kuwaiti crude.
In the short-term the rates for chartering ships in the Middle East could rise as some owners consider avoiding the region, lowering supply, JPMorgan Chase & Co. analyst Noah Parquette wrote in a report.
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