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Factbox: Oil, LNG, shipping markets digest new risks after Strait of Hormuz attack

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Factbox: Oil, LNG, shipping markets digest new risks after Strait of Hormuz attack

London — Risk levels associated with shipping crude oil and LNG via the Strait of Hormuz, the Middle East's key shipping artery, have escalated sharply, inflating tanker costs in the region.

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US Secretary of State Mike Pompeo said Thursday that the Front Altair and the Kokuka Courageous tankers were hit by "unprovoked attacks" from Iran just a month after similar attacks on pipelines in Saudi Arabia and on ships in nearby waters off Fujairah.

Pompeo said the US -- which has deployed warships and military aircraft to the region to counter Iranian threats to close the Strait of Hormuz -- would raise the attack with the United Nations' Security Council.

Fatih Birol, the head of the International Energy Agency, said Friday the attacks represent a major concern for global energy security, adding that the agency stands ready to respond if oil supplies are disrupted.

Related content:
Infographic: Attacks on Middle East oil tankers and infrastructure

Factbox: Risks rise in key oil chokepoint Strait of Hormuz


**A large number of shipowners were not accepting bookings for Middle East cargoes on Friday, citing a lack of clarity on safety after Thursday's attacks in the Gulf of Oman, Singapore-based shipbrokers and Asian market sources said.

**Shipowners said war risk premiums must be charged to the charterer, indicating that risk appetite for Middle East loadings varied widely.

**China, India and South Korea are the biggest buyers of the heavier, sourer crudes that Middle East producers tend to supply.

**Some shipowners were hesitant to call at the strategic oil port of Fujairah, while others said that calling at Persian Gulf ports had not been ruled out and there were always some vessels willing to take the risk.

**Singapore-based shipbrokers said the move will likely not have an immediate impact on crude flows as charterers are not in urgent need of vessels and crude supply was ample.

**The strait is also crucial for LNG shipments from Qatar, which exported about 6.6 million mt in April, about 23.5% of global LNG supply, according to Platts Analytics.

**Qatar supplied some 2.8 million mt to Europe, representing about 40% of its total exports, with most of the remaining 3.8 million mt heading to Asia.

**Current LNG demand is subdued on limited appetite in Europe and Asia for power generation and restocking following a mild winter which has left healthy storage inventories.


**Brent crude futures initially spiked over 4% immediately after the attacks on Thursday. ICE Brent retreated later in the day, however, eventually settling $1.34 higher at $61.31/b. The benchmark crude contract was trading 1.3% higher at $62.14/b at 1605 GMT Friday.

**The absence of a sustained oil price impact from the latest attack reflects a market refusing "to take the tanker attacks seriously, at least until a fully laden crude oil VLCC is hit," Petromatrix said in a note.

**Insurance rates for crude oil cargoes loading in the Middle East, however, are now up to 20 times higher following the latest attacks. A shipping insurance source said shipowners now have to pay 0.1%-0.4% of the cargo value in insurance, compared with 0.02% prior to the attacks.

**Freight rates for very large gas carriers on the Persian Gulf-to-Japan route jumped to near four-year highs, supported by Persian Gulf tensions and strong lifting volumes of spot and term LPG cargoes from the Middle East.

**The LNG market was not affected by the incident on Thursday or Friday. The Platts JKM was assessed at $4.440/MMBtu at the Friday close in Singapore, down $0.014/MMBtu from Wednesday's close in London.


**The 21-mile wide Strait of Hormuz is the key maritime transit route for Persian Gulf oil exporters. The EIA estimates 18.5 million b/d of seaborne oil exports passed through the strait in 2016, mainly to customers in Asia.

**Only Iran and Saudi Arabia have alternative access routes to maritime shipping lanes. Saudi Arabia has access to the Red Sea via Yanbu port, where its King Fahd crude export terminal has a loading capacity of 6.6 million b/d.

**Yanbu port is served by the 4.8 million b/d Petroline (East-West Pipeline), which has been pumping around 1.9 million b/d, leaving spare capacity of 2.9 million b/d, according to the EIA.

**The UAE operates the 1.5 million b/d Abu Dhabi Crude Oil Pipeline (Habshan-Fujairah), which has been pumping around 500,000 b/d, leaving spare capacity of 1 million b/d, the EIA said.

According to Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics: "As US oil sanctions intensify the economic pressure on Iran in the months ahead, we would be unsurprised to see aggressive actions from groups with alleged links to Iran in Yemen, Iraq, Syria, or elsewhere in the Middle East. The geopolitical uncertainty will support demand for inventory as oil balances tighten in 2H19, at a time that OPEC spare capacity just north of 1.0 million b/d will be insufficient to offset a major supply disruption."

(Adds Platts Analytics comment.)

-- Staff report,

-- Edited by James Leech,