Tankers moving through the Gulf of Guinea in West Africa are paying additional insurance premiums, compared with relatively safe sea lanes, due to escalation of piracy incidents and sea robberies in Nigeria and others.
Additional premiums have to be paid by shipowners if their ships move through, load or discharge cargoes from this region, Intertanko’s London-based Marine Director, Phillip Belcher, was quoted by Platts to have said on the sidelines of the International ‘Safety at Sea’ conference in Singapore.
According to him, these premiums have to be paid because Nigeria and a major chunk of the Gulf of Guinea are among the listed areas — for hull war, piracy, terrorism and related perils — of the Joint War Committee of the Lloyd’s Markets Association, which comprises underwriting representatives.
Pirate attacks off the coast of Nigeria rose in the first half of the year, while attacks on shipping globally fell to their lowest level for 21 years, according to the International Chamber of Commerce’s International Maritime Bureau.
Nigerian pirates kidnapped 24 crew members in the first half of this year, up from just 10 in the first six months of 2015, the IMB said.
It said these incidents were “increasingly violent”, with Nigerians accounting for eight of the nine incidents worldwide in which ships were fired on in the January-June period.
Belcher said all shipowners whose vessels were passing through the Gulf of Guinea had to notify the insurer of the measures being taken to mitigate the risk and accordingly the premiums are finalised on a case by case basis.
Nigeria’s problems are not restricted to piracy and offshore robberies alone.
According to market sources, West African crude loading has taken a severe beating due to the unrest in Nigeria.
A few weeks ago, Shell’s Nigerian unit declared force majeure for Bonny Light crude liftings. A month earlier, the company ended its force majeure due to another leak on the same pipeline.
Nigeria’s crude output is at its lowest levels in 30 years. Forcados, Brass River and Qua Iboe grades have all been impacted by dreaded attacks and sabotage by terrorists, according to shipping industry officials and analysts. Compared with the beginning of the year, crude loadings in Nigeria are down by 500,000 barrels per day, they said.
Theoretically, this translates into disappearance of demand for one Suezmax every two days or 15 Suezmaxes a month, they added.
A Suezmax typically carries one million barrels of crude and is a popular mode for transporting cargoes from West Africa.
“We are closely monitoring the situation and will be very concerned if current criminal activities [around Nigeria] become a political football,” said Belcher.
A few years ago when piracy in the Gulf of Aden was at its peak, strategic experts had expressed similar concerns over potential linkages with Islamist terrorism in Somalia, though eventually no such major nexus was unravelled.
“Governments [in the region] should take all measures to provide security to ships moving in the region and if they can’t, they should allow private agencies to do so,” he said.
At least two or three protected anchorages have been set up close to the ports in the Gulf of Guinea where ships are provided security by private armed guards, Belcher said.
Countries along the Gulf of Guinea do not permit private armed guards from outside on board the ships when they are in their territorial waters.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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