Large oil producers around the Persian Gulf ramp up exports

Miami Herald

7 hours ago

LONDON -- As fighting between Israel and Iran intensifies, the major oil producers around the Persian Gulf, including Saudi Arabia, have been racing to load tankers with exports, possibly as a hedge against future disruption.
These increases are occurring despite jumps in insurance costs and shipping rates and hazards like jamming of navigation systems.
Analysts say these producers are preparing for the possibility that fighting could spread to oil export installations, which have been largely spared so far, or that shipping could be disrupted through the Strait of Hormuz, the narrow passageway from the Persian Gulf through which a large portion of both oil and liquefied natural gas travel.
'They want to make sure that they reduce the risks,' said Homayoun Falakshahi, head of crude oil analysis at Kpler, a research firm. 'That means export as much as possible, as soon as possible.'
Kpler estimated that Saudi Arabia's oil exports had increased 16% through mid-June from the same period in May.
Other producers in the region including the United Arab Emirates and Iraq have boosted shipments around 10%, Falakshahi said.
The intent appears to be to put as much oil as possible on tankers and send it out of the Persian Gulf, mostly to Asian countries such as China, which are, increasingly, the main customers for the oil producers.
Although countries like Saudi Arabia and the United Arab Emirates have improved their ties to Iran in recent years, having oil on tankers provides a buffer in case fighting spreads to their lifeblood industry.
Even Iran, despite being the target of intense bombing by Israeli jets, appears to have managed a modest recent increase in exports, Kpler said. Because of U.S. sanctions on Iran, nearly all of its exports go to China.
Prices for Brent crude, the international benchmark, have risen about 10% since June 13, when the conflict between Israel and Iran escalated. They dropped more than 3% Friday, to about $76 a barrel, after President Donald Trump said he would delay his decision on U.S. involvement for two weeks.
There have been no serious disruptions to oil exports from the Gulf, but there are signs of increased concern about operating there.
The number of empty tankers in the Persian Gulf ready to take on new cargoes has declined sharply, Falakshahi said, potentially indicating a future fall in exports.
Marcus Baker, global head of marine and cargo at insurance broker Marsh McLennan in London, said war risk insurance for shipowners that did business in areas like the Persian Gulf had risen about 60% since the conflict started last week. Before, rates had been at modest levels. 'People are just a little bit nervous,' Baker said.
Freight rates on large tankers from the Gulf to China have also risen about 50%, Kpler reported.
So far, these added costs are not enough to deter shipping by themselves, Baker said, but there are increasing concerns about the welfare of ships' crews, who have been under stress from conflicts and other disruption in this decade, including monumental port delays during the pandemic.
'Crew welfare, crew safety, mental health of crew has become a big issue in the last few years,' he said.
Shipping experts also report an increase in interference in the area with the satellite navigation systems used by ships to report their positions.
This jamming, which has been unusually intense, is potentially dangerous because it can cause ships to appear in false locations on tracking systems and make it more difficult for owners to follow them.
This article originally appeared in The New York Times.
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