Aramco Expects Tightening in The Oil Market

Global oil markets can handle short-term disruptions in the Red Sea. Still, prolonged Houthi attacks on shipping could lead to tanker shortages due to extended journeys and supply delays, according to Saudi Aramco CEO Amin Nasser.

Nasser expects the oil market to tighten as consumers have depleted supplies by 400 million barrels over the past two years. This leaves OPEC’s spare capacity as the primary source of additional supply to meet rising demand, as reported by Reuters.

Houthi attacks on shipping in the Red Sea have compelled many companies to reroute their transport around Africa. The Iran-backed Houthis claim they are acting in solidarity with Palestinians suffering from Israeli attacks in Gaza.

“If it’s short-term, tankers might be available, but if it’s long-term, that could be a problem. More tankers will be needed for longer trips,” Nasser commented at the annual World Economic Forum in Davos.

Global Shipping Crisis: Suez Canal Traffic Halves!

Container ships have ceased passing through the Suez Canal and the Red Sea. This is the quickest route between Asia and Europe, which approximately 12 per cent of the world’s ships use. The alternative route around South Africa’s Cape of Good Hope takes an additional ten to 14 days.

Nasser highlighted that Aramco can bypass the Bab al-Mandab strait near Yemen. From there, the Houthis launched attacks, using a pipeline that connects its eastern oil facilities with its western coast, allowing faster access to the Suez Canal.

In one month, the volume of goods passing through the Red Sea halved.

Maersk, the world’s second-largest container shipping company, announced on January 2 that it had indefinitely suspended navigation through the Red Sea. This decision followed repeated attacks by the Yemeni Houthis on container ships in the Bab el Mandeb Strait, which separates Africa from Asia.

Missiles were reportedly fired at a French-owned ship on Tuesday, following US military intervention in an attack on a Maersk ship on Saturday. US Central Command stated this was the 24th attack on merchant ships since November 19. On the first day of the new year, an Iranian warship entered the Red Sea.