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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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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.