Saudis halt oil shipments through waterway after Houthi attack

ADEN: In this file photo taken on Nov 30, 2010, a fishing boat is seen entering the harbor in this southern city, situated at the mouth of the Red Sea. — AFP

KUWAIT: The situation and tension at Bab al-Mandeb strait has minimally affected Kuwaiti oil exports, said Kuwait Oil Tanker Company (KOTC) yesterday. KOTC CEO Sheikh Talal Khaled Al-Ahmad Al-Sabah said that around 90 percent of Kuwaiti oil exports to Southeast Asia did not go through Bab al-Mandeb, indicating that only around 10 percent of tankers, filled mostly with oil byproducts, took the strait's route.

KOTC, said Sheikh Talal, will and always take the necessary precautions to make sure its tankers are safe and secure, adding that contingency plans are in place to address any possible situation or emergency. He added that the oil sector evaluates, on a daily basis, the situation in the strait - one of the most important global oil transportation routes linking the western hemisphere with the east. KOTC was founded in April 1957 as a company dealing with the marine transportation of Kuwaiti oil.

Saudi Arabia said yesterday it was suspending oil shipments through the Bab al-Mandeb strait after Yemen's Iran-aligned rebels attacked two tankers in the waterway, underscoring the risk of an escalation in tensions in the region. Brent crude futures rose 59 cents to $74.52 a barrel by 1008 GMT, extending their rally into a third day but falling from a 10-day high in earlier trading. The Houthis, who have previously threatened to block the strait, said yesterday that they had the naval capability to hit Saudi ports and other Red Sea targets. Iran has threatened to block another strategic shipping route, the Strait of Hormuz.

Saudi Energy Minister Khalid Al-Falih said the Houthis attacked two Saudi oil tankers in the Red Sea on Wednesday, one of which sustained minimal damage. "Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb strait immediately until the situation becomes clearer and the maritime transit through Bab al-Mandeb is safe," he said. The chairman of KOTC said the country was studying whether to follow suit. "All options are possible but there is nothing confirmed so far," Badr Al-Khashti told Reuters, adding no decision had been taken.

"The Saudi halt will cause prices to increase slightly and for a limited period," Kuwaiti oil expert Kamel Al-Harami said. "It will cause a 15-day delay in oil shipments as they have to re-route through south of the African continent," Harami told AFP. The main impact of the incident appears to be military, according to Harami. "It could be a reason for increased naval presence for many countries, mainly the United States and Russia, thus resulting in an escalation of tensions," he said.

The powerful commander of Iran's Revolutionary Guards Quds force, Qassem Soleimani, criticized the US role in the world's top oil exporting region. "The Red Sea, which was secure, is no longer secure with the American presence ... (US President Donald) Trump should know that we are nation of martyrdom and that we await him," Soleimani was quoted as saying yesterday. Industry and shipping sources said the suspension was unlikely to impact Saudi crude supplies to Asia, but could add shipping costs to Saudi vessels heading to Europe and the United States due to a longer transit.

The Bab al-Mandeb strait is only 28.97 km wide, according to the US Energy Information Administration (EIA), making hundreds of ships potentially an easy target. Falih's statement said the two Very Large Crude Carriers (VLCCs) attacked were operated by Saudi shipping company Bahri, which identified the damaged vessel as the Arsan. "The two million barrels capacity for each tanker were full of crude oil cargo at the time and were headed for export. One of the VLCCs sustained minimal damage," Falih said. Most exports from the Gulf that transit the Suez Canal and the SUMED Pipeline also pass through Bab al-Mandeb. An estimated 4.8 million barrels per day of crude oil and refined petroleum products flowed through the waterway in 2016, the EIA said. - Agencies