Red Sea Crisis in Full Swing Despite Months of Turbulence

Incidents and Houthi attacks in the Red Sea remain a steady constant, despite international efforts to mitigate the crisis. This, in turn, is having a major impact in the shipping market. In its latest weekly report, shipbroker Xclusiv said that “reports from the Red Sea indicate no progress towards de-escalation. Houthi rebels continue targeting ships with drone missiles and recently claimed to possess a new hypersonic missile. The Houthis’ leader, Abdul Malik al-Houthi, threatened attacks on ships traveling towards Africa’s Cape of Good Hope, potentially disrupting east-west maritime traffic. The extent of the Houthi threat and their capability to counter the US and its allies remains unclear”.

According to Xclusiv, “the International Energy Agency (IEA) hiked its 2024 oil demand forecast by 110,000 b/d to 1.3 million b/d, citing a stronger US economy and increased fuel use by ships rerouted due to Red Sea attacks. While global onshore oil stocks remain at their lowest since at least 2016, detours around the Red Sea have led to a rise in oil stockpiles held on ships. The IEA also downgraded its 2024 oil supply forecast by 930,000 b/d to 102.86 million b/d, citing both extended OPEC+ production cuts announced in March and earlier disruptions to Canadian output caused by cold weather”.

“Middle Eastern diesel exports to Europe surged to a two-month high of 374,000 b/d in February, up from 318,000 b/d in January. Saudi Arabia and Kuwait led the surge, with Saudi Arabia becoming the top exporter at 192,000 b/d in February, up from 169,000 b/d in January and Kuwait’s shipments more than doubling to 114,000 b/d from 55,000 b/d over the same period. Also February marked the first time since August 2023 that Egypt shipped diesel to Europe. Since the EU’s ban on Russian oil products in February 2023, Europe has become heavily reliant on Middle Eastern and US diesel imports. Africa and Latin America, meanwhile, have absorbed much of the displaced Russian oil products, including any European surplus. A key question now is whether recent drone attacks on Russian refineries will curtail their diesel exports. This could prompt African and Latin American countries to seek alternative sources from the Middle East and the US, potentially tightening diesel supplies for Europe”, the shipbroker said.

Meanwhile, according to Xclusiv, “in the tanker sector, the orderbook-to-fleet ratio (by number of vessels) currently sits at 8.7%. While this is nearing the levels of 2020 and 2021, it remains almost 40% below the average orderbook-to-fleet ratio observed between 2014 and 2019.Despite a strong start to 2024 with nearly 67 tanker orders placed year-to-date, the tanker market needs more orders. Nearly 50% of the active tanker fleet consists of vintage vessels (16+ years old). The VLCC sector has the most serious aged fleet issue compared to other tanker segments. Here, a total of 269 vessels (30% of the VLCC fleet) are older than 16 years old, with only 37 new VLCCs currently on order (4% orderbook to VLCC fleet ratio). Notably, 31 of these new VLCCs are scheduled for delivery in 2026 and 2027. The tanker fleet growth (in DWT) was about 2 % in 2023. Our predictions based on the orderbook and the assumption of about 7.3 mill DWT in yearly demo (based on the average of the last 10 years – since 2013) are that the fleet growth will be 2024: 0.02%, 2025: 1.7%, 2026: 1.8%”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide