Recent attacks by Yemen's Houthi group on commercial ships at the southern end of the Red Sea have led several shipping companies and LNG tankers to avoid the traditional East-West trade route. The attacks have made reaching the Suez Canal more perilous, affecting about 12% of world shipping traffic and 4-8% of global LNG cargoes. Key points include:

Importance of the Red Sea Route:

12% of global shipping and 4-8% of LNG cargoes pass through the Suez Canal.

51% of LNG trade from the Atlantic Basin to the Pacific Basin and vice versa relies on the Suez Canal.

Main Shippers and Traffic Through the Route:

Northbound traffic dominated by European imports of crude oil and middle distillates.

Southbound traffic includes crude flows from Russia to Asia.

Qatar, the United States, and Russia are major shippers of LNG via Suez.

Alternative Routes and Impact on Prices:

Qatar is the primary exporter in an east-to-west direction via the Suez Canal.

An alternative route through the Cape of Good Hope could increase Qatari voyage days significantly.

Asian spot LNG prices currently at $12.3 per mmBtu, with oil prices around $79 per barrel.

Market Impact and Risk Perception:

Crude oil and oil products market players assess the impact based on the duration of shipping disruptions.

Oil prices have rallied, impacting oil freight prices and insurance war risk premiums.

LNG market players believe LNG trade is likely to be largely unaffected, with short-term delays possible for U.S. shipments to China/Asia.

Market Players' Perspectives:

Analysts suggest that the extent of the impact depends on the duration of shipping disruptions.

Delays may affect medium sour crudes from the Middle East, substitutable with grades from Brazil, Guyana, and Norway.

Most believe that U.S. LNG shipments might experience short-term delays, but overall global supply is not significantly threatened.

Overall Market Resilience:

Market players, including refiners and LNG analysts, do not observe panic buying or significant behavioral changes.

While risks exist, experts suggest that a sudden supply crunch is not anticipated in the near future.

The situation remains dynamic, and market players are closely monitoring the duration and implications of the disruptions.

SOURCE:GOOGLE