"Dramatic Picture For History Books": LNG Tankers Still Absent From Red Sea
Ongoing attacks by Iran-backed Houthi rebels on commercial vessels navigating through the Bab el-Mandeb Strait have forced all liquefied natural gas tankers with destinations to Europe and the US to divert routes, which means longer and more expensive routes.
"This is a dramatic picture for history books. Bookmark it!" Energy Outlook Advisors' Anas Alhajji posted on X.
Alhajji posted a map showing no LNG tankers transiting the Red Sea, Suez Canal, or the Gulf of Adan.
Using Bloomberg data, Alhajji's map is correct when searching for LNG tankers with an end destination in North America, South America, Central America, Eastern Europe, Western Europe, Australia, and Oceania.
Alhajji explained LNG tankers are avoiding the southern Red Sea for two reasons:
- Carries are super expensive and fairly new relative to average oil tankers
- Insurance premium is very high
Analyst Andreas Steno Larsen responded to Alhajji's post, "Not really news? It has been like that for a while."
Not really news? It has been like that for a while
— Andreas Steno Larsen (@AndreasSteno) March 16, 2024
However, continuous Houthi attacks disrupting the critical shipping lane, which accounts for 12-15% of global trade and 20% of international container shipping, only indicates that shipping companies must continue to rejigger routes that are more costly and longer. These extra costs will only feed into global inflation.
With President Biden's Operation Prosperity Guardian mission failing, there is no immediate solution to resolve the Red Sea crisis.
In a recent interview, former Supreme Allied Commander at NATO, Adm. James Stavridis, told Goldman's Allison Nathan, "In my career, I've never seen a higher level of maritime risk than I do today. That owes first and foremost to the return of great power competition, which we thought was basically over when the Soviet Union collapsed."
Three decades after the Cold War ended, conflicts rage across Ukraine, Gaza, the Red Sea, Myanmar, the Sahel, Sudan, and potentially Taiwan and Iran. The rules-based system of international relations modeled on America's liberal-democratic values is crumbling as the world stumbles into a nascent multipolar era.
With conflict only expected to worsen, David Asher, a senior fellow at Hudson Institute, has warned about increasing risks that Saudi Arabia's refineries could come under drone and or missile attack by Houthi rebels and spark a global financial shock.