The Red Sea’s Suez Canal is key for global shipping, handling 12-15% of worldwide transport. Due to recent events, shipping costs spiked with uncertainty looming over whether this could push crude oil prices past $80.
The recent attacks by Yemen’s Houthi group on commercial ships in the Red Sea have heightened concerns regarding a potential increase in crude oil prices. On December 15, brent Crude Oil was valued at $75 per barrel, but it surged past $79 by December 21.
In response to these attacks, major shipping companies like MSC, CMA CGM, MAERSK, and Hapag-Llyod have altered their vessel routes that pass through the Red Sea.
The Red Sea serves as a crucial pathway for transporting oil, liquid gas, and various commodities globally. It’s estimated that 12-15% of worldwide transportation occurs through the Suez Canal. Consequently, several shipping lines have implemented war risk surcharges on their prices since Wednesday. Reports suggest that ocean freight rates to certain destinations have risen by up to 40%. Whether this situation will push crude oil prices to $80 or higher remains uncertain at this point.
Amidst this, the Israeli army reported the deaths of 3 Israeli hostages, leading to increased pressure for a prisoner exchange and another ceasefire, subsequently reducing regional tensions.
There are reports that Ukraine’s president announced plans to recruit 500,000 new soldiers to combat Russia. It remains uncertain whether the ongoing Russia-Ukraine war nearing its second year might impact the war situation or the global economy.
In the past week, the situation in the Middle East has intensified, leading to a surge in crude oil prices, nearing the $80 mark, although there’s significant resistance to surpassing this level.
Simultaneously, on December 20, Singapore’s HSFO CST180 spiked by approximately $13, reaching $443. Singapore’s bulk bitumen also saw a rise of $5, closing at $480. South Korea’s bulk bitumen settled at $390, marking a $5 increase.
Middle East Market Prices
Meanwhile, the price of bitumen in Bahrain remains steady at $400, while in Europe, the range fluctuates between $360 and $450.
India anticipates its fifth price drop on January 1 in 2024, expecting a decrease of $12-15. However, the extent to which the Middle East crisis might impact the Indian market remains uncertain.
In the past week, Iranian refineries displayed reluctance in purchasing vacuum bottom, resulting in a lack of competition among them, while facing pressure from buyers to lower prices.
The upcoming prices of vacuum bottom in Iran are set to be announced within the next two days. Initially, before the Middle East crisis unfolded, there were expectations of downward price trends, but now, the outcome remains uncertain as per the pricing formula.
With less than a week remaining until the end of 2023, it appears that the ongoing crises will significantly impact the upcoming New Year.
