Houthi attacks on 2 Saudi Arabia-flagged tankers drive Brent crude price past $100, Pg1

Key Highlights:

• Houthis attacked two Saudi Arabia-flagged tankers, Encelia and Layla, in the Red Sea on July 23.
• The attacks led to Brent crude prices surging past $100 a barrel, a 7% increase over the previous day.
• The incident occurred near the Bab el-Mandeb Strait, a critical chokepoint for global oil trade.
• Saudi Arabia had been rerouting some 4 million barrels of crude through Yanbu on the Red Sea coast to Asian markets, including India.

Detailed Insights:

• The Houthi attacks are part of a declared blockade on Saudi shipping, citing Saudi Arabia's "blockade of supplies" and an attack on Sanaa international airport.
• The Saudi Press Agency confirmed a projectile attack on the Encelia, stating the crew was safe and the vessel secured.
• Disruptions in the Bab el-Mandeb Strait could force rerouting of cargoes via the Suez Canal and around Africa, significantly increasing transit times and freight costs.
• Very Large Crude Carriers (VLCCs) cannot transit the Suez Canal fully loaded, requiring partial offloading and reloading at Ain Sukhna and Sidi Kerir.
• India, a major oil importer, relies on these maritime routes, though it has diversified its crude sources to include African nations, Brazil, Guyana, and the U.S.
• The attacks follow recent incidents in the Black Sea involving Ukrainian attacks on Russian merchant ships and Russian attacks on Ukrainian ports.
• Shipping insurance rates for the affected routes have reportedly increased significantly, nearly matching those for the Strait of Hormuz.

Key Concepts Involved:

• Bab el-Mandeb Strait: A narrow waterway connecting the Red Sea to the Gulf of Aden and the Arabian Sea, crucial for global shipping.
• Suez Canal: An artificial sea-level waterway in Egypt, connecting the Mediterranean Sea to the Red Sea, providing a shortcut between Europe and Asia.
• Strait of Hormuz: A narrow strait between the Persian Gulf and the Gulf of Oman, a vital chokepoint for oil transport from the Middle East.
• Very Large Crude Carrier (VLCC): A type of supertanker designed for transporting large quantities of crude oil, typically over 200,000 deadweight tons.