Jet fuel most exposed to Red Sea closure, analysts say

Reuters/Khaled Abdullah

• Ships avoid waterway after attacks
• Houthi rebels in Yemen fire on ships
• 30% of seaborne jet fuel shipped via Suez

Trade analysts warned on Monday that jet fuel is the commodity most exposed to an interruption of trade in the Red Sea, as the world’s main shipping companies said that they would avoid the waterway because of missile and drone attacks. 

Several container shipping lines, including CMA CGM of France, MSC of Switzerland and A.P. Moller-Maersk of Denmark, said over the weekend that they will now avoid the Suez Canal and Red Sea after a series of attacks by Houthi militants based in Yemen. 

On Friday the US Navy said that the Houthis targeted two ships with missiles, the MSC Palatium and MSC Alanya, as they traversed the Red Sea.  

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A drone, believed to have been launched by the Houthis also attacked a container ship owned by Hapag-Lloyd of Germany and flagged to Liberia in West Africa. 

Matthew Wright, principal freight analyst at Kpler in Dubai, said on Monday that “safe passage through the Red Sea is now a serious concern”. 

Kpler said that 8 percent of global seaborne bulk trade passes through the Suez Canal.

Wright said that jet fuel is the most exposed, with more than 30 percent of seaborne jet fuel shipped via the Suez Canal. Naphtha, diesel, grains and oilseeds and chemical products are also at risk, he warned. 

Maersk said on Friday that it was “deeply concerned” about another incident involving one of its ships, the Maersk Gibraltar, which was en route from Salalah in Oman to Jeddah in Saudi Arabia. It said that the vessel had not been hit in the attack. 

CMA CGM , the third largest shipping container group in the world, said in a statement that it too was “deeply concerned” about attacks on commercial vessels in the Red Sea. It said that the situation was deteriorating and that it was pausing shipping “with immediate effect”. 

The frequency of attacks has been rising in recent weeks although few, if any, casualties have been reported. Last week a Houthi military spokesman claimed responsibility for another missile attack, on a Norwegian tanker, the MT Strida. 

In November Houthi fighters seized the Galaxy Leader, a Japanese ship, and detained its multi-national crew in the port of Hodeidah. 

The nearby Bab al-Mandab is a 20-mile-wide water gateway to the Red Sea. It is one of the world’s most important routes for global seaborne commodity shipments connecting the Arabian Gulf, Asia, and Europe. 

The US Energy Information Administration says the route accounted for around 12 percent of total seaborne-traded oil shipments in the first half of 2023. Liquefied natural gas (LNG) shipments using the route accounted for about 8 percent of worldwide LNG trade. 

Oil prices have risen slightly in the past week on worries about the situation in the Red Sea, although that has been mitigated by higher supply from the United States which has surprised on the upside. Benchmark Brent crude was trading at $77 on Monday, having risen 0.9 percent in the past week, according to Bloomberg.