MOSCOW (Pakistan Point News / Sputnik - 27th March, 2021) The temporary blockage of the Suez Canal is unlikely to seriously disrupt the oil trade between the middle East and Europe, let alone the global industry, as less than four percent of the world's crude oil shipment move through the waterway, an analyst told Sputnik.
"We got about 40 million barrels of water-borne trade flow of crude oil globally every day. For [transport through] the Suez Canal, it's about 1.5 or 1.7 million barrels per day, depending on the month you're looking at. So it's about below four percent [of global crude oil] that goes through the Suez Canal," Paola Rodriguez Masiu, Vice President Oil Markets at Norway-based consultancy Rystad Energy, told Sputnik.
After the Ever Given container ship was trapped in the Suez Canal and halted maritime traffic in both directions on Tuesday, concerns over prolonged blockage of the key transport route drove global oil prices higher this week.
But the Rystad Energy analyst explained that the blockage's impact on oil trade from the Middle East to Europe appears to be overstated.
"Despite what many might think, more crude could move by pipeline connecting the Gulf of Suez with the Mediterranean than through the canal itself. The Sumed pipeline transports about 80 percent of the oil shipped from the Middle East Gulf to Europe, and has spare capacity to absorb some of the shock generated by this bottleneck," she said.
Masiu pointed out that crude oil shipment moving through the Suez Canal today are mostly from northern European suppliers, such as Russia and the Baltic countries, to their customers in Asia, including China and India.
Nevertheless, for the oil suppliers affected by the blockage, they would have to face the difficult decision of whether to divert their products through the alternative route of moving around Africa, the analyst noted.
"Vessels that want to continue their voyage and deliver now have to take a two-week detour around Africa, a both costly and more challenging endeavor. Doing that will mean that not only their current deliveries will be delayed, but also their future scheduled ones," she said.
But such detours would also face the risks of being not cost-effective, if the Suez Canal can be cleared within a short time, Masiu added.
"Going around Africa also involves a different risk, that the Canal could be opened again within days. Then any vessel that chose the tour of Africa would need much more time to deliver compared to waiting for the Canal's reopening. Trading firms and shipping conglomerates now have to work on engineering calculations of how quickly Ever Given can be freed to decide on routes and orders," she said.
If the Suez Canal could reopen by next week, it would be better for the companies to wait instead of rerouting their shipment, the analyst suggested.
