Suspension of all oil transportation in the Red Sea Saudi tanker attacked by Yemeni rebels
The Saudi Arabian Energy Minister issued a statement on Wednesday saying that the two oil tankers (VLCC) were suspended by the Shiite Hussein rebels in Yemen, thus suspending oil transportation in the Red Sea.
Energy Minister Khalid al Falih said that in order to protect the safety of the vessel and its crew and to avoid the risk of oil spills, Saudi Aramco immediately suspended all oil transportation through the Bab-Mandab Strait. The company is carefully assessing the situation and will take further action based on prudence.
Located on the coasts of Yemen, Djibouti and Eritrea, the Bab el-Mandeb Strait connects the Red Sea and the Arabian Sea and is one of the world's most important shipping routes for offshore oil and other petroleum products. According to estimates by the US Energy Information Administration (EIA), crude oil and refined oil shipped to Europe, the United States and Asia via this waterway in 2016 was 4.8 million barrels per day.
Bloomberg quoted the EIA as saying that the narrowest point of the Bab-Mandab Strait is only 18 miles (about 29 kilometers). Rebel attacks could force oil from Saudi Arabia, Kuwait, Iraq and the United Arab Emirates to bypass the Cape of Good Hope in southern Africa, pushing up transportation time and costs.
This will allow Saudi Arabia to slow down its oil delivery to its two major markets, Europe and North America. At this point, the oil market was originally turbulent due to tight supply and increased geopolitical risks. Iran had previously threatened to refrain from refusing the Hormuz Strait, the main channel of offshore crude oil transportation, if its oil exports were blocked.
The Saudi statement also stated that Iranian-backed Houthi armed forces have always threatened international shipping in the Red Sea, and terrorist attacks on oil tankers will also trigger environmental disasters.
The Financial Times quoted former White House energy consultant and Bob McNally, founder of American oil consultancy Rapidan, as saying:
At a time when spare capacity is close to zero and oil supplies in Iran and elsewhere are likely to be interrupted, the Saudi Energy Minister’s statement is bound to cause concern and concern, especially in Europe and the United States.
Today’s attacks on tankers and Saudi public statements will exacerbate Saudi Arabia’s tension with Iran, a threat that has increasingly threatened Saudi land and offshore oil transportation.
The military conflict between Saudi Arabia and Houthi has been going on for three years. In September 2014, the Yemeni Houthi captured the Yemeni capital, Sana’a, and later occupied the southern part of the country, forcing Yemeni President Hadi to take refuge in Saudi Arabia. In March 2015, Saudi Arabia and other countries launched a military operation codenamed "Decisive Storm" to fight the Houthi armed forces.
International oil prices closed higher on Wednesday, rising for the second consecutive day. Brent crude oil rose 1.57%, hitting $74.59 per barrel, closing at $73.93. WTI closed up 1.14% to $69.30 a barrel.
Earlier in the day, data released by the US Energy Information Administration (EIA) showed that US dollar crude oil inventories fell to 404.9 million barrels, the lowest since February 2015, alleviating the oversupply concerns in the pressure market in recent weeks.