While global oil markets are accustomed to injecting geopolitical uncertainties into oil prices, such a geopolitical fallout has not been seen for some years. The world's largest oil exporter, who continues to play the role of the global oil market swing producer with its OPEC + partners, sees an escalation in attacks on its oil export infrastructure and shipping.
Saudi Arabia announced on Tuesday that armed drones had done so attacked two of its oil pumping stations. This happened just two days after the sabotage of two oil tankers carrying Saudi oil near the UAE. Meanwhile, the US military said it was prepared for Iranian-backed troops in the face of increasingly tense exchanges between Washington and Tehran on "potential threats to US forces in Iraq". Tuesday's attacks on pumping stations more than 200 miles west of Riyadh and the attack on four tankers off the UAE on Sunday have raised concerns that the US and Iran may be heading for a military conflict. On Thursday, however, Trump told the media that he did not want to wage war with Iran.
Also on Thursday, a coalition led by Saudi Arabia carried out air strikes on the Yemeni capital Sana'a. The deadly airstrikes, which reportedly killed six people, came after Iran-backed Houthi rebels in Yemen, which control the capital, took responsibility for the drone attack on Tuesday on Saudi Arabia's critical oil pipeline. Of course, all of this is not lost on the global oil markets, which gained more than 1
Global oil traders are not the only ones watching closely the mounting tensions in the Middle East. Global marine insurers are also considering their next move. On Thursday, the London Maritime insurers met to consider whether or not to increase the shipping insurance rates for tankers in the Arabian Gulf.
So far, however, they could not reach consensus. The Joint War Committee, which includes Lloyd's Market Association (LMA) members and representatives from other insurance providers, will meet again on Monday to discuss the matter further, said Neil Roberts, Head of Marine Underwriting at the LMA. Related: High-grade gasoline vehicles are already here
According to reports, the group does not yet have enough information to make a decision about possible rate increases. "At the moment there are not many facts or verifiable information (about the attacks on Sunday)," said Roberts on Wednesday. "There is still no decision on whether or not to change the listed high-risk areas.
There are a number of non-change options, adding that it would take seven days for changes to take effect. " The Golf must already inform the insurers. The question is whether ships within the Persian Gulf and the ships that sail there are in additional danger, "he said. The last time the Joint War Committee updated the list of risk areas was June 2018.
Some are already expecting a rise in shipping rates, including Asian oil refining companies, which rely heavily on crude oil imports from the Middle East. Asia receives around 70 percent of its crude oil from the Middle East, while disruptions to oil production or shipping routes can hit Asian economies, including China and Japan, the world's second and third largest economies, hardest.
Ashok Sharma, Managing Director Shipbroker BRS Baxi's Singapore director told Reuters earlier this week, "There does not seem to be a [insurance premiums] increase yet." If safety in the Gulf region worsened, insurers might have no choice but to increase premiums for maritime insurance.
By Tim Daiss for Oilprice.com
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