Logistics Middle East – August 2019

38 AUGUST 2019 | LOGISTICS MIDDLE EAST http://www.logisticsmiddleeast.com

ANALYSIS | SHIPPING

A wider conflict with Iran would be nega-

tive for most types of ships and for the

oil markets in particular, as fewer ships

will transit the Straits of Hormuz.

The following analysis focuses on VLCCs,

which lift most of the crude cargo volumes

out of the Arabian Gulf.

A look at history

In the tanker war of 1987-1988 (Operation Earnest Will),

US vessels escorted ships through the Strait of Hormuz

by reflagging Kuwaiti tankers temporarily under the US

flag. Rates for ships fell overall as tensions pushed up the

price of oil at the start of the war, eroding TCE returns

and reducing demand for Arabian barrels.

War risk cost

Events already have led to a higher war risk cost. This

will be borne by someone, most likely the charterer ac-

cording to the current war risk clause wording. However

commercial terms will be negotiated on a case by case basis.

Armed guards are also a possibility, which introduces an

additional cost and escalates overall risk.

Effect on trade

We would expect to see a significant increase in exports

from other key oil producing countries who can provide

seaborne trades. The following chart shows the regional

loading trends of VLCCs from the start of 2013 to the pre-

HOW A CONFLICT

BETWEEN US AND

IRAN MIGHT

IMPACT OIL TRADE

The main result would be higher

oil prices, resulting in lower de-

mand for oil products in the short

and medium term. Producers out-

side the Arabian Gulf would see the

greatest beneË t”

A look back at history gives us an insight into the

impact a US-Iran conflict might have on oil shipments

in the Arabian Gulf

attacked in the Strait of^ Six tankers have been

Hormuz since May.

a major chokepoint for^ The Strait of Hormuz is

30% of the world’s oil.