The British oil giant, Shell, has suspended shipping operations in the Red Sea due to ongoing Houthi attacks on vessels navigating the sea. As more large companies decide to divert goods, the oil market will get much tighter.
The CEO of Saudi oil giant, Aramco said that the global oil markets are going to be squeezed and will have to cope with Red Sea disruptions in the short run, although prolonged attacks by the Houthis on ships would lead to a shortage of tankers due to longer voyages and a supply delay.
Amin Nasser told Reuters he expected the oil market to tighten after consumers depleted stocks by 400 million barrels in the last two years, which left OPEC’s spare capacity as the main source of additional supply to meet rising demand.
“If it’s in the short term, tankers might be available … But if it’s longer term, it might be a problem,” Nasser said in an interview on the sidelines of this week’s World Economic Forum in the Swiss ski resort of Davos. “There will be a need for more tankers and they are going to have to take a longer journey”.
Citing people familiar with the matter, last week, Shell took the step of halting all crossings due to concerns that a successful rebel attack could trigger a massive spill in the region, as well as threaten the safety of the crews on the ships, according to a report by The Wall Street Journal.
The Houthis have been attacking vessels they believe to be linked to Israel in what they say is a show of solidarity with the Palestinians following the escalation of the war in Gaza. However, after Friday’s strikes by the US and UK on numerous sites in Yemen, the militant group declared US and British interests “legitimate targets,” claiming “anyone attempting to hinder us from doing so will fail.”
The oil giant’s decision comes as several global shippers, including other leading energy companies, have started sending their vessels on longer and more expensive journeys around the Cape of Good Hope in Southern Africa. BP announced last month it would pause all shipments through the Red Sea, while LNG exporter QatarEnergy did the same last week.
Shell Becomes Latest To Suspend Red Sea Shipments After Two Fresh Houthi Attacks On Tankers
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