The cost to insure Persian Gulf oil shipments is soaring
The cost of insuring Middle East oil shipments is soaring as tensions mount in a region responsible for about a third of all seaborne petroleum.
So-called war risk premiums for a standard oil cargo from the Persian Gulf and the tanker hauling it can now cost upwards of USD500k, according to people familiar with the insurance market. Earlier this year, the same premiums would have cost owners less than 1/10 of that.
The vulnerability of maritime traffic to mounting tensions came into sharp focus on Monday (24 June) when US President Donald Trump said other nations need to do more to help protect navigation from the Middle East in the wake of six attacks on tankers since early May. The incidents, which American officials blamed on Iran, prompted an adviser to insurers to classify the entire Persian Gulf as a riskier area for shipping, giving underwriters scope to charge bigger premiums.
“This will get passed on to the customers,” said an analyst. “Refiners are paying more for crude and they will pass on the cost to customers if they can. If refiners choose not to pass that along, their margins would get squeezed."
The insurance prices being lifted fall into two categories: one is for the vessels themselves, the other for their cargoes. While the cost of covering the tankers surged as soon as the most recent attacks happened, the surge in prices for the cargoes only happened over the past week (ended 21 June). – Bloomberg News.
On Monday, Brent crude increased 0.34% to USD77.74 a barrel and West Texas Intermediate gained 0.82% to USD57.90 a barrel.
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