Delay in oil delivery set to cause increases in prices and inflation
There is a delay in oil deliveries from Saudi Arabia and Iraq totaling almost 9 million barrels as tankers travel the longer route around Africa rather than transiting the Red Sea.
As a result of ship tracking data on Bloomberg, ships loaded with crude oil and refined products this month from Saudi Arabia's Ras Tanura and Jubail ports and Iraq's Basra have shifted course, sailing away from the Bab el-Mandeb strait at the southern entrance to the southern Red Sea. In response to US and UK airstrikes against the Houthis in Yemen on Jan. 12.
The diverted vessels are headed toward Africa. That's a longer voyage from the Middle East to European refineries and consumers. The detour can add more than two weeks' sailing time compared to the trip from the Persian Gulf through the Red Sea and Suez Canal.
The diversions and delays highlight the chaos in the shipping industry that's spilling over into the wider economy and raising the risk of inflation as food and other goods get disrupted. As the US continues to target the Houthis in an effort to deter attacks, the heads of the largest carriers expect that the threat will remain for months to come.
As US strikes broaden the crisis, Red Sea shipping chaos worsens
The Middle East, which produces about a third of the world's crude, ships most of it to Asia and is not affected by oil tanker attacks. Many vessel owners want to avoid the risk. Crude prices are below $80 a barrel in London.
After Russia cut off imports of Russian energy, European sales have become more important. Rerouting tankers adds transit costs, and delays can create inefficiencies.
In addition, five tankers carrying as much as 6 million barrels of Iraqi crude have diverted away from the Red Sea after loading in the Persian Gulf this month.
