Oil Trade Flows to Adjust to Red Sea Diversions: WoodMac

Over 20% of oil tanker trade is now diverting on the longer journey around the Cape of Good Hope with the disruption around the Bab el-Mandeb strait looking set to persist according to Wood Mackenzie.

• Russia’s exports are particularly vulnerable to further disruption with almost 80% of oil exports using the route to reach the Middle East and Asia.
• Almost 50% of total diesel flows are now avoiding the Red Sea with jet fuel the most impacted.
• Wood Mac expect the recent spike in both refined product cracks and freight rates to ease as trade flows adjust although the impact on the global refining sector is expected for some time to come.
• European distillate cracks need to remain elevated to draw sufficient imports from the Middle East and West Coast India. India diesel flows to Europe could return in the coming weeks with the East-West spread rebalancing.
• European refiners are likely to be forced to run more US crudes if disruption continues which would reduce European diesel/jet yields even more.