A giant cargo ship running aground and blocking the Suez Canal horizontally has not only crippled one of the world’s busiest shipping lanes, but has also caused shipping prices for tankers to almost double this week. Analysts believe that the continued blockage of the canal will have a greater impact on the oil products market.
Since Tuesday (March 23), the 400-meter-long giant cargo ship “Ever Given” (Ever Given), operated by Taiwan‘s Evergreen Marine Corp. has been trapped in the Suez Canal. Rescue efforts are underway, but due to bad weather, the process may take several weeks. The Suez Canal Authority said it would welcome offers of help from the United States.
Shipping data from global financial market data and infrastructure provider Luft (Refinitiv) shows that since Tuesday, more than 30 tankers have been waiting to pass on both sides of the canal.
The transportation disruptions in this narrow waterway connecting Europe and Asia have deepened the problem for shipping companies, which already face disruptions and delays in delivering retail goods to consumers.
According to Luft, the cost of shipping clean products such as gasoline and diesel from the Russian Black Sea port of Tuapse (Tuapse) to southern France rose 73 percent from $1.49 a barrel on March 22 to $2.58 a barrel on March 25.
At the same Time, the benchmark index for shipping vessels from the Middle East to Japan also saw a climb.
Asia’s already weak diesel market was also made worse by canal blockages as Asia exports diesel to Western markets such as Europe. Data from global oil and gas consulting firm FGE shows that in 2020, more than 60 percent of the diesel exported from Asia to Europe will be transported through the Suez Canal.
The company said that if ships were diverted to the Cape of Good Hope, it would add about two weeks to shipping trips, resulting in an extra 800 tons of fuel for large cargo ships, which is causing some cruise ships to take a wait-and-see attitude. Fuel is the largest single cost of a ship, accounting for 60 percent of operating costs.
Analysts expect the upside impact on smaller tankers and oil products (such as naphtha and fuel oil exported from Europe to Asia) to be even greater if the Suez Canal remains closed for several weeks.
Rystad Energy’s head of gas and power markets said in a report Thursday that if the blockage continues for two weeks, about 1 million tons of LNG could be delayed for delivery to Europe.