New tanker attack raises oil tensions in Red Sea

Singapore — An oil products tanker was hit by an explosion early Dec. 14 while discharging a gasoline cargo at Saudi Arabia's western port of Jeddah in the latest incident following a spate of oil-related attacks in the Red Sea north of the Yemeni border.

Saudi Arabia's Ministry of Energy confirmed that a terrorist attack took place, and stated it resulted in a small fire that was extinguished. The incident on the LR1 tanker did not cause any casualties, damage to the unloading facilities or impact supplies, according to a statement on the Saudi Press Agency, or SPA.

Shipowner Hafnia confirmed the incident in a statement, which also said, "it is possible that some oil has escaped from the vessel, but this has not been confirmed and instrumentation currently indicates that oil levels on board are at the same level as before the incident."

"At this moment it can't be guessed whether the external object was a bomb or a missile or mines," a source with the direct knowledge of the matter said.

The 22 crew members are safe, the source said.

This is not the first time that BW Rhine has come on the radar for a mishap. In 2012, the BW Rhine was seized by pirates from anchorage off Lome in Togo. Some of the gasoline cargo belonging to Vitol at the time was stolen before the ship and its crew including the Indian Captain were set free.

The incident follows a spate of attacks and attempted attacks on Saudi Aramco's infrastructure by Houthi rebels. The Aframax tanker, Agrari, was damaged Nov. 25 near the Saudi Arabian port of Al Shuqaiq on the Red Sea, Platts earlier reported.

Market sources said it was from a detonation of a floating mine. However, the attack had not been claimed. Ships traversing the trade routes of the Persian Gulf have witnessed several attacks recently, which were all attributed to Yemen's Houthi rebels.

The latest incident also highlights the risks involved in maritime trade in the Middle East in general and Red Sea region in particular where armed guards man the ships and War Risk Premia is to be paid while moving cargoes.

The Strait of Hormuz, which leads to the Persian Gulf, is a critical chokepoint through which 30% of the world's seaborne oil passes.

Close to 100 VLCCs load crude in the Persian Gulf and Red Sea region each month in spot deals alone. In addition, there are more loadings on period chartered VLCCs and also in Suezmaxes and Aframaxes.

REGIONAL GASOLINE MARKET

The incident is likely to have only a limited impact on regional supply-demand dynamics since gasoline supply in the Middle East is abundant, according to industry sources.

"There are enough cargoes to make up for the loss of one LR tanker. At most, there might be some delay logistics wise. Traders [in the Middle East] are quite cautious now," a gasoline trader said.

Light distillate inventories at UAE's Fujairah port rose 3% to total 6.818 million barrels in the week ended Dec. 7, the highest since Sept. 14, S&P Global Platts reported earlier.

Aramco Trading had fixed the BW Rhine to lift 60,000 mt of gasoline loading Dec. 6 from Yanbu for a voyage to Jeddah at a lump sum freight of $370,000, confirmed sources aware of the matter. Aramco could not be reached for a confirmation.

The ship had arrived laden at Jeddah on Dec. 10, showed data from cFlow, Platts trade flow software.

Discharge operations were stopped and emergency procedures enacted following the incident, after which the fire was extinguished with the assistance of the shore fire brigade and tug boats, the Hafnia statement said.

The ship was still berthed at J3 in Jeddah, and no other product tankers were seen at the nearby berths, cFlow data showed.

DAMAGE ASSESSMENT

BW Rhine's cargo was being discharged in one of Jeddah's terminal at the time of the incident and it is now for the port authorities and the Saudi government agencies to investigate the matter, sources involved in the fire dousing operations said.

The next steps will be a condition assessment, taking the cargo off the ship and ensure the incident is not causing any pollution, one such source said.

"The actual damaged area is too hot at the moment and the daylight is just about beginning to show up in Jeddah," the source said. The hull has been damaged at one of the water ballast and cargo tank sides, the Hafnia statement said.

According to sources, the ship will have to be taken to a repair yard after discharging the cargo and insurance claims filed the North of England P&I Club, which is providing the protection and indemnity cover to the BW Rhine. As a result, its next voyage will have to be cancelled, they said.

(Updated with map, more details)