<article><p>The Mideast Gulf very large crude carrier (VLCC) market has so far registered no impact on rates from the <a href="https://direct.argusmedia.com/newsandanalysis/article/1013655">escalating tensions</a> in Yemen, following Saudi Arabia air strikes against Yemen's northern Shi'a Houthi opposition. </p><p>While the core VLCC routes from the Mideast Gulf and west Africa to Asia-Pacific are geographically distant from the conflict zone, VLCCs heading west via the Suez Canal need to pass through the narrow waterway of less than 40km across, which separates Yemen from Djibouti. But the access point to the Red Sea is well-policed, and being so narrow, unlike the piracy zone, owners may be hoping their interests will be protected.</p><p>Ships passing through what is described as a "chokepoint" for tanker traffic already pay insurance premiums to pass through the piracy zone off Yemen and for war risk. </p><p>Most shipping sources are so far playing down the potential impact of an escalation in tension in an already risky region for shipping. </p><p>Most of the oil exported from Yemen heads to China, and is mostly shipped on Chinese-owned vessels and often on Contract of Affreightment (COA) basis, where owner and charterer agree a fee for a series of defined voyages. For this reason, the spot market would not register a direct impact of a cessation in Yemen exports.</p><p>Ships can divert away from the Suez Canal and take cargoes around the Cape of Good Hope in South Africa to avoid the Red Sea completely. Tankers delivering into the Mediterranean regularly ship oil to Ain Sukhna in the Red Sea, for transit via the Sumed pipeline to Sidi Kerir in Egypt. </p><p>The counter to the so far sanguine response in the shipping community focuses on the potential for a knock-on effect if ships are routinely diverted away from the Red Sea, tightening up the supply of vessels because of the longer voyage time around the Cape of Good Hope. And if, as some shipping sources are speculating, the Suez Canal is closed at any point by the escalating crisis, the potential impact of all VLCCs diverting via the Cape of Good Hope would be huge. </p><p>West African crude is the likeliest replacement for Yemeni oil. But there are no confirmed reports so far of ships being cancelled or diverted. Italy's Eni fixed the VLCC Adventure earlier this week to carry a cargo of crude from the Mideast Gulf to Ain Sukhna loading 29 March, and there is so far no known change to the ship's schedule. </p><p>jcw/et</p><p><br> Send comments to <a href="mailto:feedback@argusmedia.com" target="_parent"> feedback@argusmedia.com </a></p><p><u><a href="http://www.argusmedia.com/Info/General/News" target="_TOP"> Request more information </a></u> about Argus' energy and commodity news, data and analysis services. </p><p><i> Copyright © 2015 Argus Media Ltd - <a href="http://www.argusmedia.com/" target="_TOP"> www.argusmedia.com </a> - All rights reserved. </i></p></article>
