Oil tankers avoiding Mid-East refuel hub after ship attacks

The port of Fujairah in the United Arab Emirates. Recent spiralling tensions between Iran and the United States have kept some oil tankers away from the Gulf of Oman, near the strategic Strait of Hormuz - the choke point through which about a third o
The port of Fujairah in the United Arab Emirates. Recent spiralling tensions between Iran and the United States have kept some oil tankers away from the Gulf of Oman, near the strategic Strait of Hormuz - the choke point through which about a third of global seaborne oil moves. PHOTO: AGENCE FRANCE-PRESSE

DUBAI • Oil tanker owners are avoiding sending their ships to the Middle East's main refuelling hub after a spate of attacks on vessels in the past two months ratcheted up tensions and highlighted the growing risks of operating in the region.

Strikes on tankers just outside the Persian Gulf last month were the second in a month near the Strait of Hormuz, the choke point through which about a third of global seaborne oil moves. Now demand for ship fuel at Fujairah, the United Arab Emirates coastal shipping hub close to the Strait, has waned as some tankers stay away, traders involved in the regional market said.

"Only expect issues to get worse before they get better," said senior broker Matt Stanley at Star Fuels in Dubai. Fujairah is seeing "a significant drop in demand owing to war-risk premiums" that are levied by ship insurers, he said.

Ships would not shun Fujairah entirely because there are few alternatives close by with the same range of services, the traders said. One possibility, though, is to go to Singapore for carriers that are making return trips from Asia. That can be advantageous for tanker owners anyway if they are considering sailing to West Africa to seek their next cargoes.

Vessels that go to Fujairah solely for fuel and servicing would be more likely to go elsewhere, the traders said. However, a large proportion of tankers sailing through Hormuz to load crude or fuel in the Gulf would probably keep visiting the port as those ships will have paid higher insurance premiums already, they said.

The root cause of the slump - whether ships are avoiding the Middle East altogether or just skipping Fujairah - is not completely clear.

But since the attacks in early May, insurance costs have soared and some owners turned wary of sending their carriers to the region.

One of the largest, Frontline, even temporarily paused trading from the Persian Gulf.

Fujairah provides tankers with fuel, supplies and repairs as they ply the route from the Persian Gulf through the Strait of Hormuz to refineries the world over.

Local officials say that there has been no slump in refuelling from facilities at the port itself, but that only captures a fraction of the trade. Carriers are also supplied at anchorage areas - where four tankers were attacked in early May - and it is there that brokers and traders are reporting the drop-off.

There is no public data for overall sales, but the brokers and traders say there has been a drop of about 15 per cent since the May attacks, although their estimates vary sharply.

One broker said bunker demand had declined more than 30 per cent to as little at 500,000 tons a month.

Facts Global Energy estimates sales have slumped to about 650,000 tons a month, a drop of about 13 per cent compared with the period before the incidents.

Volumes reached as much as 1 million tons in 2016, but had been slipping since then.

ENVIRONMENTAL RULES

Officials at the port and in the local government declined to comment on the volume of ship-fuel being traded offshore.

The amount of refined products transferred into and out of storage tanks at the port probably reached the highest level this year during last month, said director of operations William List at the Fujairah Oil Tank Terminal.

That did not include data on offshore bunkering, he said.

Government economic adviser Salem Khalil said any decline in bunker volumes would likely be due to new environmental rules that will take effect next year.

BLOOMBERG

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on July 09, 2019, with the headline Oil tankers avoiding Mid-East refuel hub after ship attacks. Subscribe