Recent threats and confirmed attacks by Yemen's Houthi rebels in the Red Sea have caused major disruptions to oil shipping, particularly impacting Saudi Arabian exports. Several oil tankers, including the Xin Long Yang and Rodos, carrying Saudi crude to China and India respectively, reversed course towards the Suez Canal to avoid the Bab el-Mandeb Strait, a vital chokepoint connecting the Red Sea to the Gulf of Aden. This diversion adds weeks to travel times and significantly increases logistics costs.
The Houthis' declaration of a naval blockade against Saudi Arabia on Monday led to immediate impacts. Kpler, a maritime data company, reported that two oil tankers heading towards Bab al-Mandab made U-turns. The Institute for the Study of War noted that at least seven vessels changed course to avoid the strait. On Sunday, only eleven commodity vessels passed through the Bab el-Mandeb, a low not seen in months, with only seven being oil tankers.
Confirmed attacks have further escalated the situation. The Houthis claimed responsibility for striking two Saudi oil tankers, the Encelia and Layla, with drones and missiles. The state-run Saudi Press Agency confirmed an incident involving the Encelia, reporting a fire at the bow. Separately, the UK Maritime Trade Operations (UKMTO) reported an "unknown projectile" striking a Saudi oil tanker near Al Shuqaiq, resulting in a fire. These incidents have caused benchmark Brent crude futures to jump 5.5% to $99 per barrel and U.S. West Texas Intermediate futures to rise 5% to $91.21.
The increased risk has also driven up operational costs for shipping companies. The price of cargo insurance in the Red Sea has doubled, according to Reuters, adding hundreds of thousands of dollars to each voyage. Despite the ongoing threats, sources indicate that crude oil loading operations at Yanbu, a key Saudi port, are continuing for vessels already in the Red Sea or arriving via the Suez Canal. However, companies like Ambrey have advised operators to reconsider voyages through the Red Sea when calling at Saudi ports due to the high threat level.
While Saudi Arabia previously exported around 3.6 million barrels of oil daily via the Bab al-Mandab strait, compared to fewer than one million before the war, oil traffic is now being severely impacted. For example, two very large crude carriers (VLCCs) were heading to Yanbu to load Saudi crude, and the New Explorer and New Pearl, carrying 2 million barrels of Saudi and Emirati crude, were exiting the Red Sea for Chinese ports, but the overall flow is now disrupted, highlighting the global ramifications of the Houthi actions on energy markets and trade routes.
