Al-Qaida offensive in Yemen adds to crisis, but little oil
sector impact
London (Platts)--17Apr2015/823 am EDT/1223 GMT
* Mukalla port not one of Yemen's main terminals
* All Yemeni ports remain blockaded
* Bab al-Mandab strait open, but fears persist
The takeover on Thursday by al-Qaida fighters of an oil terminal
and an airport in the southern Yemen province of Hadramawt adds
to the crisis currently besetting the Middle Eastern country,
but changes little for an oil sector already brought almost to
its knees by the ongoing conflict.
Oil prices spiked Thursday when news of the al-Qaida offensive
broke, but were trading lower Friday as it became clear there
were few immediate implications for the oil sector.
The terminal occupied by the al-Qaida fighters is reported to
be the Mukalla port, which is not one of the country's main
facilities.
"Their main ports, certainly, on the tanker side are Aden, Ras
Isa and Ash Shihr," one trader told Platts Friday.
And in any case, all of the country's ports have been blockaded
since the end of March, meaning there has been no traffic in or
out of any of the country's oil ports for several weeks.
"The last time our ship loaded from a port in Yemen was almost
two weeks ago," a source with a global oil trading company said
Friday.
China is the major importer of crude from Yemen -- three VLCCs a
month are typically lifted from Yemen's Ash Shihr port bound
mostly for China carrying Masila grade crude.
"Although the capture of a Yemeni oil export terminal may sound
alarming, it is not at all clear the event will have any impact
on international supplies," Citi Futures Specialist Tim Evans
said in a note.
"In the current environment, we can only assume that both
production and consumption are down sharply and that little
crude oil could be exported in any case," Evans said.
The port closures have forced companies to halt significant
chunks of oil production in the country, with the International
Energy Agency earlier this week estimating that production had
fallen to around 60,000 b/d in April, down from already low
levels of 120,000 b/d.
The IEA added that it expected production to average just 50,000
b/d through the end of 2015, noting, though, that Yemen's oil
output even before the conflict was not significant in the
context of global supplies.
Shipping fears
However, there is concern that the intensifying conflict could
jeopardize shipping routes through the Bab al-Mandab.
Just under 4 million b/d of oil, around 4% of total global oil
supply, passed through the strait in 2013, according to the IEA,
and alternative routes to Europe from the Middle East would add
another 12 days to the voyage time.
Traders said Friday that the Bab al-Mandab strait was still
open, but warned of the impact of any disruption in the strait.
"If shipping traffic through the Bab al-Mandab strait is hit, it
will have a big adverse impact on the market," a VLCC broker in
Singapore said.
Despite the increased security risk, most of the Protection and
Indemnity clubs continue to cover voyages in the region and are
yet to increase the premiums for ships that wanted to call on
ports in Yemen, sources said.
For ships loading in or discharging in Yemen, owners typically
pay an additional $10,000-$20,000 insurance premium anyway, but
the premium has not risen in the past few weeks, they said.
Singapore's Maritime and Port Authority has though issued an
advisory for Singapore-flagged vessels against calling at ports
in Yemen due to the security risk.
Al-Qaida has been active in Yemen for years, but this latest
incident comes on the back of a months-long offensive by Houthi
militants looking to take control of parts of Yemen.
Continued violence prompted a Saudi Arabia-led coalition to
carry out air strikes on Houthi positions over the past month.
The takeover by al-Qaida of the port and airport adds to the
crisis, as both its fighters and the Houthi militants are both
heavily armed and considered equally dangerous and destructive.
--Stuart Elliott,
stuart.elliott@platts.com
--John Morley,
john.morley@platts.com
--Sameer Mohindru,
sameer.mohindru@platts.com
--Fuad Rajeh,
newsdesk@platts.com
--Edited by Jonathan Fox,
jonathan.fox@platts.com
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