The Strait of Hormuz, the world’s most important oil chokepoint, remained in focus following attacks on two tankers on June 13.
The recent attacks on two tankers in the Gulf of Oman, that saw Frontline and BSM Ship Management (Singapore) vessels damaged by limpet mines, raised concerns over the security of transit in the area.
During 2018, the strait recorded an oil flow average of 21 million barrels per day (b/d), or the equivalent of about 21% of global petroleum liquids consumption.
“The inability of oil to transit a major chokepoint, even temporarily, can lead to substantial supply delays and higher shipping costs, resulting in higher world energy prices. Although most chokepoints can be circumvented by using other routes that add significantly to transit time, some chokepoints have no practical alternatives,” the U.S. Energy Information Administration said.
Volumes of crude oil, condensate, and petroleum products transiting the Strait of Hormuz have been fairly stable since 2016, when international sanctions on Iran were lifted and Iran’s oil production and exports returned to pre-sanctions levels.
Flows through the Strait of Hormuz in 2018 made up about one-third of total global seaborne traded oil. More than one-quarter of global liquefied natural gas trade also transited the Strait of Hormuz in 2018.
EIA further explained that, if the recent attacks affect the transits, relevant companies would have limited options to bypass the Strait of Hormuz. Only Saudi Arabia and the United Arab Emirates have pipelines that can ship crude oil outside the Persian Gulf and have the additional pipeline capacity to circumvent the Strait of Hormuz.
Based on tanker tracking data published by ClipperData, Saudi Arabia moves the most crude oil and condensate through the Strait of Hormuz, most of which is exported to other countries.
EIA estimates that 76% of the crude oil and condensate that moved through the Strait of Hormuz went to Asian markets in 2018. China, India, Japan, South Korea, and Singapore were the largest destinations for crude oil moving through the Strait of Hormuz to Asia, accounting for 65% of all Hormuz crude oil and condensate flows in 2018.
Amid fears of further attempts at obstructing the traffic in the Strait of Hormuz, the U.S. said it would send an additional 1,000 troops to the Middle East as tensions build with Iran.
Additionally, the Indian Navy confirmed that it deployed two vessels in the Gulf of Oman “to re-assure India-flagged vessels operating/ transiting through Persian Gulf and Gulf of Oman following the maritime security incidents in the region.”
The latest attack came a month after four tankers were subjected to sabotage near United Arab Emirates territorial waters in the Gulf of Oman. The earlier incidents occurred east of Fujairah, one of the world’s largest bunkering hubs situated outside the Strait of Hormuz.