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Oil Tankers Avoid Fujairah In Wake Of Attacks

Fujairah

Tankers are shunning the port of Fujairah in the UAE, the main refueling hub of the Middle East, following the two attacks involving tankers in the area in the past six weeks.

Bloomberg quotes traders as saying tanker owners were worried about the situation and were opting to refuel elsewhere. The first attack, against four tankers at the port of Fujairah, led to a spike in tensions between the U.S. and Iran even though the investigation into the attacks, carried out by the UAE, Norway, and Saudi Arabia concluded the perpetrator was “a state actor” without naming it. The U.S. blamed it on Iran and Iran denied involvement.

The second attack, in June, was on two tankers in the Gulf of Oman, just outside the Strait of Hormuz. Again, the U.S. and Saudi Arabia blamed Iran for the attacks and Tehran denied the allegations. Naturally, this did not help matters and traders began worrying even more about the security of tanker traffic through the world’s busiest oil chokepoint.

There was also concern about spiking tanker insurance premiums that would affect the industry adversely.

“Only expect issues to get worse before they get better,” Bloomberg quoted a fuel broker as saying. The port of Fujairah, Matt Stanley from Dubai-based Star Fuels told Bloomberg, is experiencing “a significant drop in demand owing to war-risk premiums” that insurers were quick to raise after the tanker attacks.

Oilprice reported shortly after the second attacks that insurers were already upping premiums and this could have a lasting effect on oil prices. Between the end of May and the middle of June, that is, between the first and the second attacks, tanker insurance premiums jumped by between 5 and 15 percent, according to ship owners. Slackening demand for refueling services in Fujairah only shows this effect would spread in more than one direction.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on July 08 2019 said:
    Oil traders and owners of oil tankers around the world as well as global insurance companies are starting to take very seriously Iran’s threat that it will close the Strait of Hormuz so as to disrupt other Gulf States’ oil exports through the Strait if it was attacked by the US or if its exports were prevented from passing through the Strait.

    Furthermore, Iran’s threat of seizing a British oil tanker in a tit-for-tat move against an illegal British seizure of an Iranian oil tanker near Gibraltar a few days ago is raising the level of risk facing foreign oil tankers crossing the Strait of Hormuz. Two cases in point are the sheltering of a British tanker near the Saudi Gulf coast over fears it could be seized by Iran and the shunning of the port of Fujairah in the UAE.

    An escalating tension in the Gulf area near the vicinity of the Strait of Hormuz is being translated into higher shipping and insurance costs. Moreover, oil tankers are starting to look for oil shipments outside the Gulf region.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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