Reuters reports that the recent attacks around the Strait of Hormuz and the Gulf of Oman have increased insurance costs resulting to the decrease of purchases of marine fuels in the UAE Fujairah oil hub, as shippers are trying to mitigate their time in the Middle East.
Amid escalating tension in the Gulf of Oman, bunkers are firstly opting for Singapore, the world’s top refuelling hub, to purchase marine fuels, while their second choices are India and Sri Lanka.
Reuters’ sources added that Fujairah has seen a tonne of 380-centistoke (cst) high-sulphur fuel oil (HSFO) reducing from an average $5-$10 premium over Singapore in May to a discount of $30-$70 over the past two weeks.
$50 per ton below Singapore? Bargain, if you can cover the war risk premium
… a Singapore-based marine fuels trader-source that kept its anonymity commented to Reuters.
The attacks, the insecurity and fear, turn bunkers choose Singapore’s safety and avoid the Fujairah hub.
In the meantime, many are the shipping companies increasing their war risk insurance for vessels operating in the area of Gulf of Oman.
Hapag LLoyd previously stated
‘For cargo from/to and via Arabian Gulf (Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia Eastern Province Ports Dammam & Jubail and the UAE), the cost will be USD 42 per TEU. Yet, depending on risk situation, additional countries may be added as well as increase or mitigation of above mentioned surcharge will be considered.’
CMA CGM announced that it implements War Risk Surcharge in Middle East:
‘From July 5th, 2019, for all trades, except USA and China (August 1st, 2019): From/To Oman, the UAE, Qatar, Bahrein, Saudi Arabia (Dammam and Jubail), Kuwait, Iraq.’
Moreover, ship insurers announced the breach rate for 7 days at around 0.35% from as much as 0.5%. That would mean additional costs of up to $100,000 for a VLCC on a seven-day voyage.
Concluding, Reuters presented a timeline of the tensions, beginning from May 2, which marked one year of US’s withdrawal from the JCPOA (Joint Comprehensive Plan of Action).
