Oil shipment insurance cost increases after Middle East tanker attacks

The rapid increase of insuring cost of West Asian oil shipments after Middle East Tanker attacks has become a major concern on a region responsible for about a third of all seaborne petroleum. According to the experts, war risk premiums for a standard oil cargo from the Persian Gulf and the tanker hauling it can now cost as much as $500,000. However, previously this year, the same premiums would cost owners less than a tenth of that. The vulnerability of maritime traffic came into light when US President Donald Trump said other nations are required to provide more support to protect navigation from West Asian in the wake of six attacks on tankers since early May. The incidents prompted an advisor to insurers to determine the entire Persian Gulf as a riskier area for shipping and giving underwriters chance to impose bigger premiums. Sandy Fielden, an analyst, said, “This will get passed on the customers.” He added, “Refiners are paying more for crude and they will pass on the cost to customers if they can. If refiners choose not 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. In order to cover a cargo valuing $130 million, underwriters are now planning to charge anywhere from $150,000 to $325,000, according to the experts. Despite the surge in insurance premiums, the extra cost is still a small part of a barrel of crude. Based on standard supertanker cargo, $500,000 would equate to 25 cents per barrel. Brent futures traded at about $64.40 in London.