Tankers Steer Clear of UAE Port Amid Gulf Conflict Threat Impacting Oil Shipments

Oil Tankers Avoid Fujairah, Leading to Higher Spot Prices

Shipping firms are increasingly steering clear of the Fujairah port in the United Arab Emirates, resulting in the cancellation of oil shipments. According to a Bloomberg report that references unnamed insiders, Adnoc has been reselling these returned cargoes at elevated spot prices.

The report highlights that companies such as Nippon Yusen KK, along with a European shipping line that was not identified, have chosen not to send vessels to Fujairah. Although the port is located outside the Strait of Hormuz, its proximity to the region has made operators uneasy.

Bloomberg also pointed out that Fujairah has been struck multiple times since the onset of the conflict, with one missile attack resulting in a fire in the port's oil district after debris landed in the area.

Sources cited by Bloomberg revealed that, in response to these incidents, traders have withdrawn some shipments from Fujairah and returned the oil to Adnoc. The company has subsequently listed these barrels on the spot market, where they have commanded prices significantly above the official March Murban crude price of $63.99 per barrel. Currently, Murban crude is trading above $99 per barrel.

Despite the opportunities in the spot market, oil producers in the Middle East have begun to scale back output as tanker movements through the Strait of Hormuz have nearly come to a halt. Mixed messages from top U.S. officials regarding potential naval escorts for oil tankers have only heightened the uncertainty facing traders and market analysts.

In light of these developments, oil-producing nations in the region have collectively reduced their daily output by up to 5 million barrels, as storage facilities reach capacity with nowhere left to store excess crude. Even Saudi Arabia, which has an alternative pipeline route to the Red Sea, reportedly started reducing production at two fields earlier in the week. The UAE has also cut its output by between 500,000 and 800,000 barrels per day.

By Charles Kennedy, Oilprice.com

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