Instability in the Red Sea threatens Europe. In the coming weeks, in fact, there is a risk of a serious one diesel shortage with 66% drop in imports expected and the start of seasonal maintenance at refineries. If we add that the European Union has banned the use of Russian fuel, increasing dependence on imports from Asia and the United States, there is a risk of a diesel shortage. Europe depends for over 40% on foreign imports through the Suez Canal.
- attacks on ships in the Red Sea they initially had a limited impact on fuels. But, in recent weeks, the situation has changed rapidly. And now, and with ships forced to bypass the route through Suez, the transport fees Asia-Europe increased by 30%. This has already caused a increase in diesel prices (+15% compared to mid-December) to the highest levels of the last three months on the wholesale markets, creating a rally with possible impacts on inflation and social stability on the continent.
The increase in the cost of diesel fuel, which is particularly significant for a fuel widely used in heavy transport, agriculture and industry, may contribute to further igniting farmers' protests in several European countries.
Diesel: no Suez, we circumnavigate Africa
An increasing number of tankers (around 100 units) are avoiding the Strait of Bab-el-Mandeb due to attacks by Yemeni Houthi rebels. Ships carrying approx 56 million barrels of oil, with a significant percentage of diesel.
The accident of the Marlin Luanda ship, hit by a missile in the Gulf of Aden, has increased concerns in the sector, pushing many companies to prefer the Cape of Good Hope route. Moscow itself, believed to be immune from Houthi attacks, is starting to distance itself from the area, contributing to increasing tensions on energy prices globally.
Transport costs and times increase
The companies' decision to avoid the Red Sea has consequences in terms of costs and time. Circumnavigate Africa increases transportation costs on average 70%. For ships the cost thus goes from around 22 thousand dollars a day to no less than 100 thousand dollars a day.
Transporting diesel requires specialized tankers, the availability of which is limited. Opting for the route around the Cape of Good Hope involves a trip longer than 10 days compared to that through the Suez Canal, prolonging the occupation of the vessels. This limited availability of tankers, combined with their prolonged use, further contributes to the problem, with possible repercussions on diesel prices.
The attack on the Marlin Luanda ship
THEattack on the Marlin Luanda ship, a large tanker carrying refined petroleum products, in particular diesel fuel, which occurred last Friday was the most devastating of the missile and drone launches carried out by Houthi rebels against civilian ships near the coast of Yemen.
The accident occurred in the Gulf of Aden, a stretch of sea between the southern coasts of the state south of the Arabian Peninsula and the northern coasts of Somalia. This area is a convergence point for ships passing through the Bab-el-Mandeb Strait, known as the “Gates of Lamentation,” which connects the Red Sea to the Suez Canal and the Mediterranean.
Following the Houthi attack, most of the companies still using the Red Sea route, have decided to change course, directing their boats towards the Cape of Good Hope to reach Europe via the circumnavigation of Africa. A longer and more expensive but safer journey.
There is a risk of a black February
Major fuel transportation monitoring companies predict a critical situation for February, especially in the first few weeks, as many ships that have avoided the Red Sea will not yet have completed the circumnavigation of Africa. According to Vortexa, it is estimated that by sea only 450 thousand barrels per day of diesel will arrive in Europe until mid-month, representing about a third of the January average. The cost of transportation will be high due to the long distances that cargoes travel and the increase in ship charter rates.
The situation is also complicated by the time of year, as highlighted by a Gibson report. L'start of the global maintenance season in refineries, with the peak of shutdowns expected in February in the USA and March in Europe, contributes to the worsening of the situation. Some refineries in the Old Continent, such as Shell's Pernis in the Netherlands, the largest in Europe, will operate at half capacity until mid-April, while ExxonMobil will close in Rotterdam between mid-February and late April. Analysts expect production capacity to decline by about 1 million barrels per day in January and February.
Europe will have to rely on the United States
As for diesel, no significant shortages are expected, also thanks to weak demand (thanks to the EU's green choices). The situation could stabilize within a few weeks, with a possible reshuffling of supply routes, also influenced by developments in the war in Ukraine. However, Europe has few alternatives and may have to rely more on its supplies to the United States, which have already captured growing market shares on the continent.
In January, 9,3 million barrels of diesel were imported from overseas, around 300 per day, representing 36% of total imports, a sharp increase compared to the 15-20% recorded in most of 2023. Volumes coming from the USA have tripled since October, although the boom is not entirely attributable to tensions in the Middle East.
