WHILE several tanker operators are avoiding transiting the Red Sea, diversions of crude oil and product tankers have remained limited so far.

“As attacks in the Red Sea persist, freight rates for key flows via the region have surged but remain unaffected on a global scale. Tanker diversions have picked up in the span of the past two weeks, but these are not occurring en-masse as tankers and volumes continue to flow via the Red Sea,” said Vortexa senior freight analyst Ioannis Papadimitriou.

Most tanker operators which are avoiding the Red Sea so far have been US, Europe or Israel-linked companies and include BP, Maersk Tankers and Norden.

Papadimitriou said that within the past 10 days transit numbers are some 15% lower than on average during the same period 12 months ago although the decline is said to be more pronounced for liquefied natural gas and liquefied petroleum carriers which saw a surge in Red Sea transits before Houthi attacks intensified due to limits in the ability to utilise the Panama Canal.

Overall, however, the majority of vessels are still passing through the Red Sea, Papadimitriou explained.

Since the second half of the final month of 2023, Papadimitriou said that 19 tankers diverted from the Suez Canal to the Cape of Good Hope southbound carrying 290,000 tonnes of oil products and 860,000 tonnes of crude oil.

In the opposite direction, 13 vessels diverted via the Cape of Good Hope going northbound instead of using the Bab el Mandeb strait loaded with a combined total of 560,000 tonnes of oil products and 90,000 tonnes of crude oil.

War risk premiums have been a factor in driving a surge in freight rates for routes which use the Red Sea and have been most acutely felt for the product tanker sector.

On the TC8 (Middle East Gulf to UK-Continent) clean petroleum product route freight rates have increased by some 60% in the past month, while the TD23 (Middle East Gulf to Mediterranean) crude tanker route rose by 25% during the same period.

“Additional war risk premiums in the Red Sea have been partially contributing to the freight rate hikes for the relevant routes, but this surcharge is significantly lower than the costs linked to rerouting via the Cape of Good Hope.”

Papadimitriou noted that because of the current pricing dynamics, vessels which are diverting are mostly those chartered from companies which have announced diversions in addition to US and Israel-linked entities.

Meanwhile, some traders are said to be keen to avoid Cape of Good Hope diversions due to increased costs.

“For now in these cases, every fixture is treated differently, based on mutual agreements between the operator and the charterer.”