June 24
The cost of insuring Middle East oil shipments is soaring as tensions mount in a region responsible for about a third of all seaborne petroleum.And June 21:
So-called war risk premiums for a standard oil cargo from the Persian Gulf and the tanker hauling it can now cost upwards of $500,000, according to people familiar with the insurance market. Earlier this year, the same premiums would have cost owners less than 1/10 of that.
The vulnerability of maritime traffic to mounting tensions came into sharp focus on Monday when U.S. President Donald Trump said other nations need to do more to help protect navigation from the Middle East in the wake of six attacks on tankers since early May. The incidents, which American officials blamed on Iran, prompted an adviser to insurers to classify the entire Persian Gulf as a riskier area for shipping, giving underwriters scope to charge bigger premiums.
“This will get passed on the the customers,” said Sandy Fielden, an analyst at Morningstar Inc. “Refiners are paying more for crude and they will pass on the cost to customers if they can. If refiners choose not pass that along, their margins would get squeezed.”
The insurance prices being lifted fall into two categories: one is for the vessels themselves, the other for their cargoes. While the cost of covering the tankers surged as soon as the most recent attacks happened, the surge in prices for the cargoes only happened over the past week.
Underwriters are now aiming to charge anywhere from $150,000 to $325,000 to cover a cargo valued at $130 million, the people familiar with that market said. Until this week, the same cover cost $1,000 or less. Insuring the tanker itself now costs in excess of $200,000, based on a $75 million vessel. That’s up from less than $30,000 at the start of 2019....MORE
Shipping Rates for Mideast Oil Are Surging
Oil tanker owners are raising the prices they charge to export Middle East crude as tensions surge in a region that accounts for about a third of all seaborne petroleum shipments.
Rates for transporting 2 million-barrel cargoes from Saudi Arabia to China jumped to almost $26,000 a day on Thursday, more than double where they were at the start of June, according to Baltic Exchange in London. Shipbrokers report a surplus of vessels in the Persian Gulf, indicating that owners are reluctant to accept charters at low rates given the current risks.
“Nothing much has changed in terms of supply and demand since the latest attacks, so it’s pretty much all a risk premium,” said Halvor Ellefsen, a shipbroker at Fearnleys London.
A survey of shipbrokers involved in the Middle East trade shows they anticipate there being 22% more ships available for charter in the next four weeks than probable cargoes. That’s a smaller surplus than last week but still higher than normal for the time of year.
Trading Paused
Despite the glut, vessel owners including Frontline Ltd., one of the world’s biggest operators of supertankers, briefly paused charters in the immediate aftermath of the latest round of attacks in the region last week....MORE
