The insurance prices fall into two categories, one is for the vessels themselves and the other for their cargoes.
Tuesday 25, June 2019
(Bloomberg) --The cost of insuring Middle East oil shipments is soaring as tensions mount in a region responsible for about a third of all seaborne petroleum.
War risk premiums for a standard oil cargo from the Arabian Gulf and the tanker hauling it can now cost upwards of $500,000.
The vulnerability of maritime traffic to mounting tensions came into sharp focus earlier this week when US President Donald Trump said other nations need to do more to help protect navigation from the Middle East in the wake of six attacks on tankers since early May.
The incidents, which American officials blamed on Iran, prompted an adviser to insurers to classify the entire Arabian Gulf as a riskier area for shipping, giving underwriters scope to charge bigger premiums.
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.
Underwriters are now aiming to charge anywhere from $150,000 to $325,000 to cover a cargo valued at $130 million. Until this week, the same cover cost $1,000 or less. Insurance for a tanker itself now costs in excess of $200,000, based on a $75 million vessel that is up from less than $30,000 at the start of 2019.
Additionally, not only insurers are increasingly worried about events in the Middle East. Ship owners themselves are raising rates to lift barrels from the region, despite signs that there are plenty of vessels that in theory are available to haul cargoes.
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.