Three oil tankers were halted Friday in the Strait of Hormuz after what Iran described as mine strikes, in the latest confrontation over the waterway, one of the world's main sources of crude oil.2,3,4
Iran's Islamic Revolutionary Guard Corps said the vessels were attempting to use unauthorized routes through the strait, while Oman said it rescued 25 crew members from a burning crude tanker in the same area.3,4
As of Oct. 27, at least 30 vessels, mostly oil tankers, were hit in October, leaving at minimum 16 seafarers injured, according to data from the International Maritime Organization, a United Nations agency. Ship attacks doubled in October compared with 15 confirmed incidents in September. More commercial ships have come under attack in October than at any other point in the war. "It's a difficult situation. Ships are attacked really on a daily basis," Jakob Larsen, chief safety and security officer at BIMCO, a Denmark-headquartered shipping trade association, said.1
Crude prices have risen more than 13 percent this month as security deteriorated. The international Brent contract traded above $117 a barrel on Friday, just short of its wartime closing high of $118.35 during Iran's wave of ship attacks in March, while oil prices more generally surged Friday to their highest levels since the end of April. Yet average crude exports through Hormuz stood at nearly 11.1 million barrels per day in October, only about 2 percent lower than September despite the escalation, according to data provided by Kpler. "On balance in terms of oil coming out, there hasn't been a massive impact," Mary Melton, senior tanker analyst at Braemar, a London-headquartered ship broker, said.1,4
Flows are highly volatile on a daily basis, with exports near prewar levels one day and well below those levels another. For the week ended Wednesday, flows declined to 7.3 million barrels per day, more than 40 percent below the prewar baseline, according to Kpler. Shippers have adapted by setting up a shuttle system in which tankers load crude at Persian Gulf ports, sail through Hormuz with their transponders turned off and transfer the cargo to tankers waiting in the Gulf of Oman that then deliver it to refiners in Asia, which Melton said reduces insurance costs for ships waiting outside the strait. The system has helped flows surge more than 70 percent since July, according to Kpler, but it requires more equipment, ships and experienced crews, with about 20 percent of the world's supertanker fleet tied up in the effort, Melton said.1
It cost $249,000 per day to hire a supertanker for the journey from the Gulf of Oman to Asia in early September, rising to more than $900,000 per day by the first week of October, translating to about $21 in transportation costs per barrel compared with $6.50 a barrel in September, Melton said. "If you're an importer in Asia, you're used to paying almost nothing for freight," Melton said. "That really starts impacting your margins as a refiner," she said. More Gulf oil producers are now covering the cost and risk of shipping through Hormuz in a bid to claw back market share in Asia from the United States and other Atlantic producers, increasingly using their own tankers for the transit, she said.1
Larsen said the industry's continued willingness to transit depends on military protection, as freight rates have soared and higher oil prices have added commercial incentive to move cargo. Soaring rates have made it "more attractive for the risk takers in the industry to actually carry out these voyages," he said. "And when the cost of oil goes up that also means that there's more commercial incentives to get the oil out and sell it in the global market," Larsen said. "I don't think there would be many shipowners willing to take the risk if they didn't have that air cover from U.S. fighter jets and helicopters and drones," he said.1
How long that arrangement can continue is not known. It is also uncertain how long the U.S. military will remain engaged, particularly if Democrats regain control of Congress after Tuesday's elections and demand that the president end the war. The Wall Street Journal reported, citing people briefed on the conversations, that the United States has told several Gulf Arab nations to be ready for a short but intense military campaign following the Nov. 3 midterm elections. The U.S. Navy, which is enforcing a blockade against Iran, has warned ships that do not need to transit the Persian Gulf, Hormuz and Gulf of Oman to steer clear of the region. "Due to the current geopolitical situation, vessels which do not need to transit the area are advised to remain well clear to avoid unnecessary delays to their voyage," the U.S. military told vessels Wednesday through a notice issued by the Joint Maritime Information Center.1
The Guard said two tankers were stopped in the eastern and western parts of the strait and a third, a supertanker carrying more than two million barrels of oil, caught fire. "Two offending oil tankers, one in the eastern part and the other in the western part of the Strait of Hormuz, which were attempting to pass through the unauthorised route, encountered incidents and were brought to a halt in the waters south of the strait," the Guard said in a statement. It said separately that the supertanker "exploded and caught fire today as a result of attempting to pass through an unauthorised route." Iran said the two other vessels had switched off their navigation signals and ignored repeated radio warnings.3,4
Those claims could not be verified. Iran did not identify the ships, say where they were from, provide details about the fate of their crews or say who had laid the mines. The U.S. military denies the naval mine claims, and United States Central Command chief Brad Cooper said Friday that the strait's "internationally recognised primary transit routes" had been successfully cleared of Iranian sea mines. Separately, the Omani Maritime Security Centre said Friday that it had evacuated people aboard the RITI merchant ship, which Oman said was flying the Panamanian flag while the tracking website MarineTraffic identified it as a crude oil tanker. It is unclear whether one of the vessels described by Iran was the tanker whose crew were evacuated by Oman.3,4
Other incidents were reported Friday around the region. To the east of the Strait of Hormuz, Iran's navy said it struck and destroyed an unmanned enemy craft. Saudi Arabia said it shot down a drone near Mecca that had been launched by Yemen's Iran-backed Houthi rebels, an account the Houthis denied. Iran has repeatedly warned vessels against passing through the strait without Tehran's permission, said last month that vessels attempting to do so would face "destruction," and has asserted control over much of the waterway since the United States and Israel launched the war on Feb. 28.3,4
Iran's campaign was initially successful, with crude exports plunging nearly 90 percent to 1.8 million barrels a day in March compared with 16 million barrels per day in February, according to Kpler. Flows then rebounded over eight months as the U.S. military provided protection to tankers transiting Hormuz, before Tehran escalated attacks in recent weeks. Oil prices could turn even more volatile over the next couple of weeks with Israel's recent elections and the U.S. midterm elections on Nov. 3, with crude expected to trade in a higher range of $70 to $90 a barrel even after the conflict ends, compared with a prewar range of $60 to $70, according to a Saxo Bank briefing in Singapore. "Continued kinetic action around the Strait of Hormuz amidst doubts of a viable diplomatic pathway is keeping oil prices elevated in expectation of an escalation of the conflict in coming weeks," Saul Kavonic, head of energy research at MST Marquee, said.1,4
