Mideast Gulf petchem risk premiums poised to rise

Risk premiums on Middle East petrochemical supplies are poised to increase because of regional tensions following attacks on Saudi Arabia's oil infrastructure.

US officials have said Iran was directly responsible for the 14 September attacks, raising the threat of military action — although mixed messages from President Donald Trump are adding to uncertainty over any response.

Shipowners are expressing serious concerns over the security of their container vessels and have highlighted the need to raise premiums.

The last time shipowners made a similar request was in June, when two tankers were attacked in the Gulf of Oman, near the strategic Strait of Hormuz.

Those attacks targeted the Front Altair, which was carrying a naphtha cargo from the UAE to Taiwan, and the chemical tanker Kokuka Courageous that was loaded with methanol.

Significant pushback from Middle East petrochemical producers has so far discouraged shipowners from indicating or proposing the size of the premium they plan to implement, but an increase appears imminent.

Shipping risk premiums for polymers quoted by shipowners were at around 5pc of total freight costs in June, following the attacks, but these levels were more of a guide rather than being uniformly applied.

Petrochemical producers are privately telling shipowners to stop being opportunistic. But the shipowners remain concerned about a fall in business as a result of lower exports from Saudi Arabia.

Saudi producers have already announced production cutbacks as a result of reductions in their petrochemical feedstock supplies in the aftermath of the oil infrastructure attacks.

Affected producers included Sabic, Advanced Petrochemicals and Sadara, which are major exporters to Asia.

Sabic yesterday told its Asia-Pacific and Middle East customers that it is unable to meet existing polymer orders for September because of the feedstock shortage.