Traders, analysts, and data from the London Stock Exchange Group reveal that the Brent crude market and some oil markets in Europe and Africa are experiencing shortages partly due to shipping delays as some vessels are avoiding travel through the Red Sea. This disruption coincides with other factors such as production outages and increased demand in China, heightening competition for crude supplies that do not require passage through the Suez Canal. Analysts say the crisis is more evident in European markets.
In a sign of supply shortages, the futures market structure for benchmark Brent crude reached its highest level in two months on Friday, with tankers steering clear of the Red Sea following airstrikes by the US and UK on targets in Yemen. Victor Katuna, a senior oil market analyst at Kepler, stated, "Brent crude futures are the most affected by disruptions in the Red Sea and Suez Canal. Therefore, European refiners are the most impacted in real markets."
*Disruptions in the Red Sea Delay Shipments*
The amount of crude heading from the Middle East to Europe has declined. Kepler data shows that the volume of crude heading to Europe from the region has nearly halved, dropping to around 570,000 barrels per day in December from 1.07 million barrels per day in October. One trader noted, "Problems in the Red Sea are causing delays, prompting refiners to source their needs from local markets," while another added, "The market is suffering from shortages due to the loss of Gulf supplies."
Other developments have also contributed to the supply constraints in Europe, including reduced supplies from Libya due to protests, marking the first disruption of its kind in months, as well as decreasing Nigerian exports. Crude supply from Nigeria has fallen after the country began operating the Dangote refinery, which has absorbed some shipments.
A trader indicated that Angolan crude, which is also headed to Europe without needing to pass through the Suez Canal, is seeing increased demand from China and India due to issues related to Iranian and Russian crudes. China's oil trade with Iran has stumbled due to Tehran halting shipments and demanding higher prices, while India's imports of Russian crude have declined due to currency challenges, although India claims that the drop is due to unattractive prices.
