The attacks on oil tankers and U.S. spy drones since may have been driving the risk – and cost- skyward.
Oil insurance rates to cover tankers transporting crude around the world have been rising sharply over the last couple of months.
A US listed shipping company’s CEO pointed out that the recent attacks have spiked premiums.
Since May, a U.S. spy drone and six oil tankers have been attacked near or within the Strait of Hormuz. That waterway is a strategic transport route that connects Iran, Oman and the United Arab Emirates with their crude importers. As a result, oil insurance rates have been sharply and steadily increasing.
“As a shipping company and part of the global shipping industry, we are taking the threat to our crew and ships very seriously,” said Ardmore Shipping CEO Anthony Gurnee in an interview on CNBC. US-listed Ardmore Shipping is based in Ireland. It owns and operates a tanker fleet transporting refined oil products. “At the moment, it is business as usual (but) insurance to transit the Strait of Hormuz has actually increased 10-fold in the last two months as a consequence of the attacks,” he added.
The attacks have raised tensions between the US and Iran while increasing oil insurance rates.
Washington blamed Iran for the four oil tanker attacks that occurred in and around the Strait of Hormuz on May 12. That said, Tehran has denied any involvement in the attacks. Still, tensions spiked between the two countries last month. When Iran shot down a U.S. spy drone over the Gulf, President Donald Trump had ordered a retaliatory air strike against the Iran, which he called off at the last moment. The drone came down following two other oil product tanker attacks which occurred in the Gulf of Oman, not far from the Strait of Hormuz.
“Whoever is doing this has demonstrated that they have the ability to be very destructive,” said Gurnee.
Reuters reported that oil insurance rates to cover tankers have been heading skyward when the ships must enter what are now considered these high-risk areas. Coverage for tankers includes annual war-risk cover as well as “breach” premiums for the entry into those zones. The premiums for those policies are calculated according to the hull – the ship’s value – for a one week (seven day) period.