Risks rise in key oil chokepoint Strait of Hormuz
Monday, 17 June, 2019
The attacks on oil tankers near the Strait of Hormuz may increase levels of risk in the Middle East's key crude supply and shipping artery.
Brent crude futures climbed almost 4% immediately after the attacks on Thursday. ICE Brent eventually settled $1.34 higher at $61.31/b.
The LNG market was not affected by the incident on Thursday. The Platts JKM was assessed at $4.412/MMBtu at the Thursday close in Singapore, down $0.002/MMBtu from Wednesday's close in London. LNG ships were going through the maritime transit route as usual on Thursday, according to Platts trade flow software cFlow.
Ship owners are watching the situation closely, but none have reported any changes in daily operations or freight rates yet.
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The Front Altair and the Kokuka Courageous were carrying cargoes including naphtha when the incident occurred. Television footage later showed one of the tankers engulfed in flames.
The Front Altair was scheduled to carry a naphtha cargo from the Persian Gulf to Japan, shipping sources said. Taiwan's CPC Corporation said the 75,000 mt naphtha feedstock cargo was loaded at the UAE's Ruwais port on June 11 and that the company bought it from state-run ADNOC. The cargo was on a CFR basis, according to CPC. ADNOC couldn't be reached for immediate comment.
BSM Ship Management said the Kokuka Courageous was carrying methanol and had been damaged in the incident, 70 nautical miles from Fujairah in the Gulf of Oman and about 14 nautical miles from the coast of Iran but was not in the danger of sinking.
Due to the Fujairah attacks in May and the latest attacks Thursday, the Norwegian Maritime Authority has urged Norwegian ships to exercise extreme caution in the region.
Are the attacks a threat to the global economy?
The global economy continues to be lubricated by oil, despite the increased use of renewable energy. Transport systems depend on the steady flow of oil to refineries and a break in the flow can create shortages within a few months. The Brent crude price rose more than 4% on Thursday morning to $62.64 (£49.38) per barrel, reflecting those concerns. Tankers guided by satellite can be redirected to replace crippled ships but the oil industry has been rattled by the threat hanging over the busiest shipping lane in the Middle East and the crude cargo that travels through it.