Red Sea trade disruption hits energy sector after strikes on Houthis

Crisis threatens to expand to other sectors on supply chain constraints

By Reuters

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The Galaxy Leader cargo ship is escorted by Houthi boats in the Red Sea. — Reuters
The Galaxy Leader cargo ship is escorted by Houthi boats in the Red Sea. — Reuters

Published: Mon 15 Jan 2024, 7:54 PM

Qatar suspended liquefied natural gas (LNG) shipments via the Red Sea and six more oil tankers changed direction on Monday as disruption to the crucial trade route extended to the energy sector after US-led strikes against Houthi militants.

Attacks on ships since October by Yemen’s Houthis, who say they are acting in solidarity with Palestinians, have hit commerce and alarmed major powers in a regional escalation of Israel’s more than three-month war with Hamas militants in Gaza.

In the latest possible attack, Britain said on Monday that a vessel was hit from above by a missile 95 nautical miles southeast of Yemen’s port of Aden.

In response to the instability, the world’s second largest LNG exporter QatarEnergy has now held back at least four gas tankers from the Red Sea, a senior source said.

At least six more oil tankers were also steering clear on Monday, making 15 since last week’s Western strikes in Yemen, according to tracking data. Prior to that, it was mostly container ships avoiding the area in fallout from the Gaza war.

The Houthis have been at war with a Saudi-led coalition in Yemen for years, but turned their sights on the sea as a way to put pressure on Israel after the Gaza war began.

In the latest Western military action in the region, the United States said late on Sunday that its fighter aircraft shot down an anti-ship cruise missile fired by the militants toward a US destroyer. No injuries or damage were reported, it said on X.

Supplies affected

With some supply lines affected by the instability, carmaker Suzuki said production would be halted at its Esztergom plant in Hungary from January 15-21 as the Red Sea attacks had delayed the arrival of Japanese-made engines.

The Houthis have vowed to keep targeting Israel-linked ships and to give a firm response to the attacks on them.

US ally Britain said it had no desire to be involved in Red Sea conflict but was committed to protecting free navigation. “Let’s wait and see what happens,” Defence Secretary Grant Shapps told Sky News regarding potential further strikes.

China, too, is worried about the implications for its major commercial interests along the Suez Canal.

LSEG shiptracking data showed that Qatar’s Al Ghariya, Al Huwaila and Al Nuaman vessels had loaded LNG at Ras Laffan and were heading to the Suez Canal before stopping off in Oman on January 14. The Al Rekayyat, which was sailing back to Qatar, stopped along its route on January 13 in the Red Sea.

“It is a pause to get security advice, if passing (through the) Red Sea remains unsafe we will go via the Cape,” the source told Reuters on Monday regarding QatarEnergy.

The longer route round Africa’s Cape of Good Hope, which various shipping firms have opted for, can add about nine days to the normally 18-day trip to Europe.

The Qatari government and QatarEnergy did not immediately respond to requests for comment.

The Red Sea is linked to the Mediterranean by the Suez Canal, creating the shortest shipping route between Europe and Asia, and is connected to the Gulf of Aden by the Bab al-Mandab strait between Yemen and Djibouti.

About 12 per cent of world shipping traffic transits the canal.

Front-month European benchmark gas prices on the Dutch TTF hub were down 1.94 euros at 29.66 euros per megawatt hour (MWh) in afternoon trade on Monday, LSEG data showed.

Asia spot LNG prices fell to a seven-month low of $10.10 per million British thermal units (mmBtu) on Friday, supported by healthy storage levels in Europe and northeast Asia.

Oil prices lost more than 1 per cent on Monday as the Middle East conflict’s limited impact on crude output prompted profit taking after oil benchmarks gained 2 per cent last week.


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