Oil industry giant BP Plc has decided to pause all oil tanker shipments through the Red Sea as the Houthi militants escalate their attacks against the merchant shipping vessels. The development comes as several tanker owners demanded an option to avoid the area citing a recent wave of attacks by the Houthi militants.
“In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” the company said in a statement.
Evading the Red Sea implies that vessels are unable to utilise Egypt's Suez Canal, compelling them to take the extensive route around Africa. This elongates voyages by thousands of miles, causes delays in cargo deliveries, and results in increased fuel expenses. Additionally, this circumstance heightens the demand for vessels.
A company managing 44,000 seafarers previously indicated that it was recommending ship owners explore options other than the Red Sea.
The United States and its allies are actively exploring a strategy to secure the Red Sea, a crucial passage for approximately 12% of the world's seaborne trade.
Shipping shares experienced an upswing on various European stock exchanges on Monday following an escalation in assaults by Iranian-backed Houthi insurgents in Yemen targeting vessels navigating the Red Sea. The investors are wagering on the possibility of an extended disturbance to the critical passage, which facilitates East-West trade without the time and cost associated with circumnavigating Africa. This speculation is driven by the expectation that such a disruption could lead to an increase in shipping rates.
"We believe that the decision to avoid the Red Sea route for crude/product cargoes will increase transport time and may put further upward pressure on freight rates if this condition persists," Massimo Bonisoli, an analyst at Equita, said.
(With inputs from agencies)
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