Supertankers Switch to Diesel as Yemen’s Houthis Disrupt Oil Routes

Amid attacks by Yemen’s Houthis and changes in trade routes, supertankers that were previously hauling crude oil are now being filled with diesel. At least one very large crude carrier (VLCC), capable of carrying two million barrels of oil, is currently sailing from the Middle East to Europe with diesel instead of crude oil. Another VLCC is in the process of loading, and five more are expected to switch to carrying clean petroleum products that include diesel. This change in strategy is due to Houthi attacks on shipping in the Red Sea and Gulf of Aden that have disrupted longstanding trade routes.

Houthi Attacks Upend Global Shipping

Houthi attacks have had a significant impact on global shipping, and the change in shipping routes and demand for diesel are evidence of this. As a result, the earnings of smaller clean tankers that transport fuel like gasoline and diesel have increased. However, the impact on benchmark crude tanker rates has led shipowners to switch their vessels to another trade. While it is unclear how much diesel will end up on VLCCs and what the final destination will be, some of the fuel appears to be heading to Europe from the Middle East.

The Effect on Shipping Demand

The shift in the sailing distances as a result of Houthi attacks is reflected in shipping demand measure known as ton-miles, which measures the cargo volume by the distance transported. Last year, refined fuels shipped from the Middle East were forecasted to increase by 13% in 2024. However, due to Houthi attacks, the estimate has increased to 17% this year.

Imports of fuels to northwest Europe and the Mediterranean were previously expected to increase by 16% and 7% respectively, but these estimates now stand at 22% and 23% respectively. This underscores the increased strain on the global fleet and explains why traders are turning to larger ships.

Impact on Benchmark Diesel Prices

The sudden influx of large volumes of fuel arriving in one go is a potentially volatile influence on benchmark diesel prices. In addition, these large ships that are carrying diesel creates a deviation from the norm of a smoother flow of smaller ships discharging. Therefore, the forward curve for ICE Gasoil futures, Europe’s diesel benchmark, traded in a structure signaling oversupply for the first time in almost three weeks on Wednesday.

The Role of Suezmaxes and One-Million Barrel Carriers

Alongside the supertankers, crude carriers known as Suezmaxes that carry one million barrels are also switching over. Approximately 12 of them are expected to transition to carrying clean petroleum products in the near future. Part of the reason for this change is that as CPP volumes are shipped further around the Cape of Good Hope, transport costs can be cut leveraging economies of scale. Hence, it is possible to employ fewer and larger vessels.

Conclusion

The increasing impact of Houthi attacks on global shipping is forcing a change in strategy among supertankers and crude carriers alike. The shift to carrying diesel is evidence of this turmoil. While definitive estimates of the fallout are difficult to come by, the change in shipping routes and the increased demand for diesel underscore the significant impact of Houthi attacks on this vital industry.

Originally Post From https://gcaptain.com/supertankers-find-new-trade-after-houthi-ship-attacks/

Supertankers Discover Fresh Trade Amid Houthi Ship Assaults gCaptain