As more tankers divert from Suez Canal, there’s a ‘sea change’ in way Europe is buying crude
Al HUDAYDAH, YEMEN – JULY 17: Yemen’s replacement oil tanker Nautica floats over its arrival to Al Hudaydah port in the Red Sea on July 17, 2023 in Hudaydah, Yemen. The United Nations handed over the replacement vessel Nautica to the Sana’a government to transfer the crude oil from the deteriorating supertanker to prevent a large-scale environmental disaster if the ship’s cargo leaks into the ocean. (Photo by Mohammed Hamoud/Getty Images)
Mohammed Hamoud | Getty Images News | Getty Images
Energy prices for Europe are expected to increase as more petroleum products and crude tankers are diverting away from the Rea Sea and Suez Canal. Longer trips for the Middle-Eastern barrels that replaced Russian flows to Europe introduce supply issues, and this is leading to a “sea change” in commodity purchases by Europe, and a boost for Atlantic Basin crude suppliers including the U.S. and Brazil.
According to global trade intelligence company Kpler, at least six crude tankers are currently taking the much longer route around Africa’s Cape of Good Hope rather than the Suez Canal, a diversion caused by the Houthi rebel attacks and which can add up to 45 days to the voyage.
Europe is at the center of the diversions because its tanker supplies are at high risk of attack.
“The decision for these diversions is by the owners of the oil, which is European,” said Viktor Katona, lead crude analyst at Kpler. “European countries are seen as complicit in the Israel-Hamas war. They would rather go around the Cape of Good Hope versus taking a chance through the Red Sea.”
The resulting delays to the delivery of products — which include crude, diesel, and LNG products — vary based on the commodity being carried. LNG vessels travel faster than oil tankers because they are lighter and they can sail up to 21 knots versus the 12-13 knots for crude tankers.
Before the Red Sea disruptions, a tanker from Jamnagar, India to Rotterdam, Netherlands would have taken 24 days. Sailing through the Cape of Good Hope, the duration of the same voyage has risen to 42 days. From Basrah, Iraq, to Milazzo, Sicily, a voyage that would have taken 17 days will now take 42 days.
The longer transits can put a squeeze on the availability of tankers, with their return journey to be loaded up with product longer.
“It’s not just the arrival that is delayed, the tankers have a longer route home to be filled back up,” Katona said. “You are looking at 90 days for one delivery. That is a huge amount of time. The market is underestimating the impact of the transit duration.”
He said to expect tankers on the spot market see an increase in freight rates, and noted that in the past few days tankers carrying “clean products” such as diesel and gasoline have been going up.
“Ironically, the tensions in the area are benefitting tanker owners with longer voyages, increasing tanker utilization and ultimately higher freight rates,” said Andy Lipow, president of Lipow Oil Associates.
Katona warned that the diversions are going to be a prolonged, painful event, but a boost for both the U.S. and Brazilian energy industry. “We are seeing Europeans remodeling their purchasing patterns from companies in the Atlantic basin with no logistics constraints,” he said.
The U.S. is the largest supplier to the European market of diesel, with diesel rates recently hitting their highest level in seven years.
According to Clarksons Securities, product tanker rates soared towards the end of last week, following a drop in Red Sea activity. A long range 2 (LR2) tanker vessel that is typically capable of carrying around 75,000 metric tons of the hydrocarbon naphtha, saw an increase in earnings of 33% week over week to $74,200/day, as of Monday. Medium range (MR) tankers which typically can carry between 30,000-40,000 metric tons of gasoline or gas oil, saw earnings rise 34% week over week to $42,500/day.
“It’s more expensive, but Europeans will receive it [the diesel] faster,” Katona said.
Europe has strategic petroleum reserves with 90 days supply, so there are no worries about Europe running out of oil, but he added, “The new reality is Europe will get their oil but with an insane freight cost attached to it.”
‘Looming upside risk’ in march of diverted tankers
The ENI’s Faithful Warrior was the first tanker to start the trend when it diverted on January 11. The tanker is currently in the South African territorial waters. Since then, Kpler has tracked a subsequent array of tankers that have diverted away on route to ports: Agitos to Rotterdam, Nissos Sikinos to Fos in France, Kimolos to Aliaga, Turkey, Odessa to Pachi Megara, Greece, and the tanker Kinyras, which still hasn’t flagged its final destination, according to Katona.
“Iraqi tankers carrying crude to Europe have started to sail almost uniformly towards the Cape of Good Hope,” Katona said. “Interesting, there’s just one tanker carrying Iraqi crude and going through the Bab el Mandeb Strait, incidentally taking the cargo to Turkey, to the same Tupras [refinery operator] that saw its previous cargo seized by Iran’s IRGC off the Omani coast. So they haven’t stopped trusting the route.”
Torm, Hafnia, Stena Bulk, Hafnia, BP, Frontline, Equinor, Euronav and Shell are among the tanker operators and energy companies choosing to avoid the area following recent warnings.
Kevin Book, managing director of Clearview Energy Partners, said this parade of tankers is part of the “looming upside risk” it has been relaying to clients.
“Longer trips for the Middle-Eastern barrels that replaced Russian flows to Europe introduce supply latency, which can be bullish in its own right. And if it looks too risky to ship from Iraq through the Suez to Europe, then cargoes from other regional producers could soon follow suit,” Book said.
Slate Auto, a new EV startup backed by Jeff Bezos, has poached a key Tesla manufacturing leader to build its electric pickup truck factory in Indiana.
Napoleon Reyes is a US Marine from Indiana who got a degree in mechanical engineering from Purdue after leaving the force.
He then worked a few years at Subaru and Wabash before joining Tesla’s manufacturing team at the Fremont Factory in 2020.
There, he became part of the Model Y production ramp and was quickly promoted to lead the Model Y General Assembly in Fremont in 2022.
Reyes led Model Y GA, one of the most critical parts of vehicle manufacturing, for more than a year before being promoted again to lead new pilot processes at the factory.
Most recently, he led the launch of the general assembly line for the Model Y refresh.
The new engineering manager announced this week that he is leaving Tesla to join Slate:
A bit late on the post but after nearly 5 years working at Tesla in Fremont, I made the difficult decision to leave the Company and move closer to home with my family. It was an incredible experience being part of multiple line expansions and multiple Model Y program launches. Leading and managing the Model Y Refresh launch for GA in Fremont this year tested me professionally however we ultimately succeeded due to our amazing cross functional team collaboration. It’s been an absolute pleasure working with such great people, and I will forever be proud and thankful for everything we accomplished together.
I will be taking on a new role as Senior Manager, Plant Vehicle Engineering at Slate Auto in Warsaw, In.
Slate emerged from stealth mode earlier this year to unveil a new type of electric pickup truck featuring modular customization and an affordable price.
The company raised over $700 million through two rounds of investments from several different investors, including Jeff Bezos. It is currently raising more, which basically guarantees that it will be able to reach production.
The startup acquired a former printing plant in Warsaw, Indiana. It is currently converting to manufacture its electric pickup with a team from legacy automakers and also several former engineers and leaders from Tesla.
Rich Schmidt, an early Tesla manufacturing director, is the head of manufacturing.
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Genesis is preparing to shake things up with its most luxurious SUV yet, the GV90. Thanks to a new patent filing, we are getting a detailed look at how its Rolls-Royce-style coach doors will work.
New patent reveals Genesis GV90 coach door system
When Genesis first unveiled the full-size SUV at the NY Auto Show last March, it wasn’t the stunning design or advanced tech that caught everyone’s attention. It was the coach doors.
Although we were worried it wouldn’t make it to the production model, like many concepts, the Genesis GV90 will be offered with coach doors.
The ultra-luxe electric SUV was first caught with coach doors earlier this year on a car carrier in South Korea. Just last month, the GV90 was spotted in California with a hinge at the rear to open the coach doors.
After several new patents were filed with the United States Patent and Trademark Office for new door latching devices, we are getting a sneak peek at how they are expected to work.
The patents, titled “Cinching Device For Door Latches in Vehicle,” and “Door Latch Device for Vehicles,” give a pretty detailed explanation of how the Genesis GV90’s coach doors will operate. The “Door Latch Device” uses a door striker on the lower side of the door, which is opened or closed by a hinge unit.
Unlike traditional doors, which use the B-pillar for support, the device is attached directly to the door itself, allowing for hinge-like movement.
The cinching device works in a similar way. It’s also attached to the door and part of the vehicle. However, unlike most of its kind, Genesis found a way to use a single cinching device to control multiple units. Again, the device is used for B-pillarless doors that swing open.
Genesis already said that B-pillarless coach doors are now feasible in production vehicles. The patent reveals a glimpse into how the luxury automaker could make it a reality.
Although the Genesis GV90 is expected to be offered with coach doors, they will likely not be standard. Other variants, with traditional door handles, have also been spotted testing in the US and South Korea.
Genesis is expected to launch the GV90 in mid-2026. It will be built at Hyundai’s Ulsan plant in South Korea. The flagship Genesis SUV is scheduled to debut on Hyundai’s new eM platform, which the company said will “provide 50% improvement in driving range.” It will also be loaded with the latest technology, software, connectivity, and Level 3 or higher autonomous driving capabilities.
Source: USPTO
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Environment
Podcast: Tesla Model YL, more Tesla probes and lawsuits, new Nissan Leaf pricing, and more
In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss the launch of the Tesla Model YL, more Tesla probes and lawsuits, new Nissan Leaf pricing, and more.
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