Higher Middle East shipping costs hits Asian oil companies and shippers
ATTACKS on tankers in the Gulf of Oman on June 13 have pushed up freight rates and insurance costs for Asian oil refiners shipping crude oil from the Middle East, a region that accounts for two-thirds of Asia's oil supply
ATTACKS on tankers in the Gulf of Oman on June 13 have pushed up freight rates and insurance costs for Asian oil refiners shipping crude oil from the Middle East, a region that accounts for two-thirds of Asia's oil supply.
The attacks have heightened security concerns among oil companies and shippers operating in the region and, consequently, the war risk insurance premium (WRP) for ships passing through the Gulf has gone up 10-fold, according to industry participants, reported Reuters.
More container lines are adding risk surcharges for shipments to and from Middle East Gulf ports. Maersk Line, Emirates Shipping and MSC have joined Hapag-Lloyd, CMA CGM and APL in adding a surcharge in the region to cover increased insurance costs.
Furthermore, freight rates for very large crude carriers (VLCC) from Gulf oil terminals to Asian ports have surged 30 per cent in the wake of the attacks, Refinitiv data shows.
'Earlier it (WRP) was virtually nil for a VLCC as we were paying about US$15,000-$20,000 and now this has gone up to $150,000 to $200,000,' an official at Indian Oil Corp (IOC) said.
The IOC official said its WRP has risen to 0.4 per cent from 0.04 per cent while the Petroleum Association of Japan (PAJ) said at the end of last month that the insurance rate had increased to 0.25 per cent from 0.025 per cent.
The WRP is set as a percentage of the ship's value, meaning that newer ships are subject to higher insurance costs.
Since June 12, the cost of shipping crude from the Saudi Arabian port of Ras Tanura in the Gulf to Ningbo, China, on a VLCC has jumped 27 per cent to $1.24 a barrel, Refinitiv data indicated. In that same period and using the same type of vessel, moving crude from the United Arab Emirates to the Indian port of Visakhapatnam has increased by 37 per cent and from Kuwait to Singapore by 24 per cent, the data revealed.
A trader at a Chinese refinery said the spike in freight rates was still manageable at this stage.
'In the short-term, freight rates are not likely to go further up because demand for shipping capacity is weak,' UK brokerage Marex Spectron's head of research Georgi Slavov was quoted as saying.
Still, while freight rates are not anticipated to increase further, the oil and shipping industry remained wary of the potential for further conflict in the Middle East.
'If the current situation lasts long or gets deteriorated, it would eventually affect the overall cost,' PAJ president Takashi Tsukioka said.
'We are monitoring the situation and have been diversifying crude oil sources to replace Middle East crude oil,' an official from a South Korean refinery added.