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The spike in security risks in and around the Persian Gulf and the Strait of Hormuz in recent months has pushed up the cost of getting crude oil out of the Middle East, Lois Zabrocky, chief executive of tanker owner International Seaways, told CNBC in an interview on Thursday.
Several high-profile incidents in recent months have increased the tension in the Middle East and in the most important oil shipping corridor in the world, the Strait of Hormuz, which is in close proximity to Iranian coasts.
Since May, incidents, tanker seizures, and attacks on oil tankers at sea in the Gulf, and most recently, the attacks on vital oil infrastructure in the world’s top oil exporter Saudi Arabia, have added more costs to the insurance premiums because the area is now perceived at its highest risk level since at least 2005.
International Seaways is now performing security assessment every time its oil tankers enter the Strait of Hormuz, and the company has tightened security on board the vessels with additional staff, Zabrocky told CNBC.
“We hesitate to enter until we have orders from our customers that they are ready for us to load and then we go ahead and go into the Strait of Hormuz,” Zabrocky said.
International Seaways is putting additional security advisors with infrared ‘eyes and ears’ on its tankers, “but we are not arming our vessels,” the manager told CNBC.
Asked about whether the costs have gone up in recent months, Zabrocky said:
“It does indeed cost more for a war risk premium to enter the Strait of Hormuz at these times, so all of these heightened concerns add cost to getting the oil out of the Middle East.”
After the attacks on oil tankers in the Gulf in May, the Joint War Committee of Lloyd’s Market Association raised the security-risk status of several areas in the Persian Gulf and surrounding waterways to the highest security risk in the region since the Iraq war in 2005. The second apparent attack in June pushed tanker insurance premiums higher.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.