Oil tankers in short supply as Red Sea attacks divert trade

Longstanding warnings from the oil tanker industry that too few of the ships are being built are coming back to haunt the market after Houthi attacks on commercial shipping caused widespread diversions in global petroleum trades.

Just two new supertankers are due to join the fleet in 2024 — the fewest additions in almost four decades and about 90 per cent below the yearly average this millennium. But after owners increasingly started to shun the southern Red Sea, the lack of new capacity is starting to bite: rates have seen spikes, and voyage durations are going up.

Rates had been held in check last year as OPEC and its allies kept oil off the market. At the same time, a wider energy transition is meant do away with fossil fuels — dimming the industry’s outlook in the longer term. But increased avoidance of the southern Red Sea is adding to the duration of trades that had already become elongated due to Russia’s war in Ukraine.

“The impact of the diversions can be seen every day in shipping in general and I would say crude oil and product tanker shipping” specifically, Alexander Saverys, chief executive officer of Euronav NV, one of the largest pureplay owners, said on an earnings call earlier this month. Combined with few new deliveries and an aging fleet, the outlook for tankers is “very positive.” While other commercial vessels — especially container ships — started to avoid the Red Sea soon after the attacks started in November, oil and fuel tankers were slower to steer clear.

That all changed last month, after US and UK forces bombed Yemen in an effort to quell the incidents. However, the military interventions didn’t stop the Houthis and instead have led to many of the world’s top tanker owners staying away.

“The situation is tight in the tanker market, in particular for crude oil tankers,” said Enrico Paglia, research manager at Banchero Costa, a shipping services firm. It “will be even tighter in the future.”