Logistics Middle East
Oil shipments from the Arabian Gulf cost more than $500,000 to insure after tanker attacks
The cost of insuring Middle East oil shipments is soaring as tensions mount in a region responsible for about a third of all seaborne petroleum.
So-called war risk premiums for a standard oil cargo from the Gulf and the tanker hauling it can now cost upwards of $500,000, according to people familiar with the insurance market. Earlier this year, the same premiums would have cost owners less than 1/10 of that.
The vulnerability of maritime traffic to mounting tensions came into sharp focus in late June when US President Donald Trump said other nations need to do more to help protect navigation from the Middle East in the wake of six attacks on tankers since early May.
The incidents, which American officials blamed on Iran, prompted an adviser to insurers to classify the entire Gulf as a riskier area for shipping, giving underwriters scope to charge bigger premiums.
“This will get passed on the the customers,” said Sandy Fielden, an analyst at Morningstar Inc. “Refiners are paying more for crude and they will pass on the cost to customers if they can. If refiners choose not pass that along, their margins would get squeezed.”
The insurance prices being lifted fall into two categories: one is for the vessels themselves, the other for their cargoes. While the cost of covering the tankers surged as soon as the most recent attacks happened, which Logistics Middle East covered in our June issue, the surge in prices for the cargoes only happened as this issue went to print.
Underwriters are now aiming to charge anywhere from $150,000 to $325,000 to cover a cargo valued at $130 million, the people familiar with that market said, up from around $1,000 before.