Houthi Rebels Email Threats to Shipping Companies

Houthi rebels, allied with Iran, have escalated tensions by threatening shipping companies and attacking oil tankers in the Red Sea. The rebels sent emails warning that oil tankers would be attacked if they used ports in Saudi Arabia. International media reported that oil vessels carrying Saudi crude oil to India and China immediately turned back after receiving the threats. The situation intensified overnight when Houthi rebels attacked two Saudi oil tankers in the Red Sea. One vessel was struck by a projectile, igniting a fire in its bow. The rebels claimed the ships violated their blockade.

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It is what is risky now. If you count everything all together, it means a couple, three percent more of the world's oil supply ends up at risk or can be affected.

These actions pose a significant risk to global oil trade. Christian Kopfer, a commodities analyst at Arctic Securities, stated that the threats could impact two to three percent of the world's oil supply. Saudi Arabia has been rerouting about seven million barrels of oil per day through a pipeline from the Persian Gulf to the Red Sea, bypassing the Strait of Hormuz. This pipeline is crucial, handling a large portion of the country's 9 to 10 million barrel daily production, thus mitigating some risks associated with the Strait of Hormuz.

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Saudi Arabia manages to redirect about seven million barrels per day through its oil pipeline. So it is a very large part of the country's total production of 9 or 10 million barrels, they avoid a lot of the problems in the Strait of Hormuz.

However, a blockade of the Bab al-Mandab strait, located between Yemen and Eritrea, would deliver another severe blow to international oil trade. Saudi Arabia uses some of this oil domestically and exports the rest, with half heading north and half south. The northern route supplies the European market. While the rebels have threatened all targets within their reach, the northern route appears safer for now.

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Saudi Arabia uses some of that oil themselves, and then they export quite a lot. Of what they export, half goes north and half goes south. North reaches the European market.

Previous analyses predicted a larger impact on world trade when the conflict between the US and Iran flared up, but the actual effects were less severe. Europe and Nordic countries found alternative supply sources, notably from Canada. Kopfer noted that while volumes were secured, prices increased. Higher crude prices translate to increased costs for fuel and other goods indirectly or directly linked to oil. China has also been proactive in securing oil supplies by increasing imports from Russia, building substantial reserves during low-price periods, and adapting its industry.

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We get hold of the volumes but we have to pay a higher price for the products.