The number of oil and gas tankers passing through the Red Sea has dropped to almost zero in the wake of ongoing Houthi attacks on vessels, leaving commodity traders facing growing complexity and potential price volatility. 

Nearly a quarter of the world’s crude oil and petroleum products passed through the Suez Canal in 2023, as well as around a tenth of the world’s LNG. 

But less than 1% of activity at the Suez Canal terminal now involves ships carrying crude and petroleum products, according to data provided to GTR by the Centre for Research on Energy and Clean Air (CREA). 

Between January 25 and 30, CREA identified just one LNG vessel that traversed the canal, says energy analyst Petras Katinas. 

Mary Melton, a freight analyst at Vortexa, says southbound transits “have largely stopped”, averaging just over one per day since mid-December. 

“Some tankers were initially adopting a ‘wait and see’ approach in the Arabian Sea, but virtually all have now made the decision to divert around the Cape of Good Hope,” she says. 

Russia’s oil exports are acutely affected. Last year, the route accounted for 44% of its oil exports, but by mid-January, such shipments “reached a point of non-existence”, Katinas says. 

The route is also historically vital in facilitating LNG shipments from Egypt and Qatar, while Bloomberg reported this week that Kuwaiti cargoes to Europe were also now taking alternative routes. 

The decision to avoid passing through the Suez Canal, Red Sea and Gulf of Aden follows a series of attacks on commercial vessels by Yemen’s Iran-backed Houthi group, which says it is acting in solidarity with Palestinians following Israel’s military activity in Gaza. 

Initially, attacks predominantly targeted container vessels, with oil and gas flows through the region remaining relatively stable. But in recent weeks, the Houthis have increasingly targeted fuel tankers. 

On January 26, Trafigura announced a vessel operating on its behalf had been struck by a missile, causing a fire in one of its cargo tanks. The vessel was carrying Russian-origin naphtha purchased below the G7 price cap, the company said.  

Trafigura later confirmed that the ship’s crew had suffered no injuries or casualties, but said no further vessels operating on its behalf would transit the Gulf of Aden. 

Melton says that following the attack, “a handful of vessels linked to UK-based entities which were heading Southbound in the Red Sea have turned around to transit back through the Suez Canal”.  

CREA’s Katinas says the overall decrease in LNG traffic “cannot be directly attributed to the attack mentioned earlier”, noting that in the two weeks prior to the strike, only two other LNG vessels risked the journey. 

But for commodity traders, an escalating crisis in the Middle East points to an uncertain future. 

“The geopolitical tension this creates is indirectly affecting all potential trades, and that can translate into potential volatility of prices,” says Jean-François Lambert, founder and managing partner of Lambert Commodities. 

“For now, oil prices are in check. Overall demand is growing, but overall supply is growing faster. But if your whole strategy is trade between Europe and Asia, this is adding a layer of complexity which is quite difficult to tackle.” 

For instance, Lambert suggests that if tension grows between western governments and Iran, which produces around three to four million barrels of oil per day, a ramp-up of production elsewhere would be needed to keep prices stable. 

At the same time, the loss of revenue to Egypt is depriving the country of foreign currency, risking an adverse effect on other commodity flows, particularly agricultural goods. 

While diverting around the Cape of Good Hope “looks okay, it’s absolutely not okay”, Lambert tells GTR. 

For all cargo types, the decision to take longer, safer routes has resulted in “escalating trade costs and a surge in greenhouse gas emissions”, according to a report from the UN Conference on Trade & Development (UNCTAD). 

“The price per day of shipping and insurance premiums have surged, compounding the overall cost of transit,” UNCTAD says, adding that energy prices “are witnessing a surge… especially in Europe”. 

LSEG Shipping Research estimates in a January 25 report that for Asia-to-Europe shipments, the incremental cost of diverting a tanker around Africa costs nearly US$1mn more per voyage. For an Aframax tanker, costs are up by 110%, it says. 

The International Federation of Freight Forwarders Associations (FIATA) raised concerns in mid-January that there appeared to be a “discrepancy calculated between the proportion of surcharges and the actual costs incurred when rerouting ships away from the Suez Canal”. 

“FIATA also raises concerns about the lack of information on the content of these surcharges, noting the alarming ‘all in’ invoicing with no itemisation of the various components for shipments,” it said at the time.