Conflict in Ukraine has reshaped global oil trade routes, emphasizing the strategic significance of the southern Red Sea as a crucial corridor for oil transportation, particularly for Moscow’s exports. The conflict has prompted shifts in oil flows, impacting both European reliance on Middle Eastern oil and Russia’s redirection of exports to Asia.
As Europe turns away from Russian oil in response to geopolitical tensions, it increasingly relies on oil shipments from the Middle East. Simultaneously, Russia has heightened its oil flows to Asian markets. This shift has led to a substantial increase in oil movement through the Red Sea, with both northbound and southbound traffic rising by approximately 140% to reach 3.8 million barrels per day.
The surge in oil movement through the Red Sea exposes vulnerabilities in this critical chokepoint for global oil flows. Recent escalations in attacks on merchant ships by Houthi militants based in Yemen have further complicated the situation. Major companies, including BP Plc and Equinor ASA, have rerouted vessels and temporarily halted shipments in response to these attacks, prompting concerns about the reliability of the Red Sea route.
The evolving dynamics underscore the broader consequences of Russia’s conflict in Ukraine on the world’s energy trade map. The reshaping of oil routes through the Red Sea highlights the geopolitical shifts and challenges faced by global powers in securing vital trade corridors. As oil flows adapt to new realities, the importance of the Red Sea in the energy trade landscape has come to the forefront.
The intensified attacks on shipping in the Red Sea by Houthi militants have prompted the United States and its allies to establish a task force in the region to counter these threats. The focus on securing this key maritime route reflects the strategic importance of the Red Sea in maintaining global energy security.
Prior to beginning of conflict, the country sent around 120,000 barrels per day of crude from its western ports to markets east of Suez. In the six months following the conflict, this figure has surged to an average of 1.7 million barrels per day. Concurrently, crude shipments from the Middle East to European countries have increased from approximately 870,000 barrels per day to 1.3 million barrels per day.
The Suez Canal has witnessed a significant rise in petroleum product shipments since the beginning of Ukrainian conflict. Clean petroleum product shipments, including gasoline, diesel, and blending components, have doubled from 1.2 million to 2.3 million barrels per day. The overall traffic through the Suez Canal has increased from 1.7 million barrels per day in early 2022 to 3.5 million barrels per day between June 1 and the end of November 2023.
The European Union responded to the conflict by stepping back from Russian crude oil purchases, imposing a crude embargo in December 2022, followed by a prohibition on fuel imports two months later. This shift has compelled Russia to redirect its oil to China and India, resulting in increased tanker traffic through the Red Sea.
With Russian oil traveling on longer journeys to Asian markets, the safety of tankers in the Red Sea has become a shared concern. The potential risks include accidental attacks on ships carrying Russian oil, despite the indirect support Russia and the Houthi militants receive from Tehran. The opaque ownership and insurance structures of many tankers in the shadow fleet raise concerns about the effective coverage of liabilities, including those related to potential oil spills.
