What Red Sea crisis means for Nigeria’s oil

The recent spate of crises in the Red Sea, a crucial artery for global oil transportation, is sending shivers through Nigeria’s oil sector, raising concerns about the country’s exports.

Nigeria, Africa’s largest oil producer, relies heavily on the Red Sea route to ship its crude to international markets, particularly Europe and Asia. Any disruption in this vital passage can have a domino effect, impacting production levels, revenue generation, and even national stability.

Yemen’s Iran-backed Houthi rebels are stepping up their strikes on ships in the Red Sea, which they say are revenge against Israel for its military campaign in Gaza.

Reports from Bloomberg showed the attacks have forced some of the world’s biggest shipping and oil companies to suspend transit through one of the world’s most important maritime trade routes, which could potentially cause a shock to the global economy.

The Houthis are believed to have been armed and trained by Iran, and there are fears that their attacks could escalate Israel’s war against Hamas into a wider regional conflict.

Suspended voyages

Last week’s attack on the Maersk Gibraltar and Maersk’s decision to pause Red Sea voyages has had a cascading effect on shipping, with many major shipping companies announcing Red Sea suspensions.

Read also: BP halts Red Sea oil shipments after wave of attacks

Foreign companies such as British Petroleum, CMA CGM Group, Equinor, Euronav, Evergreen, Frontline, Hapag-Lloyd, Maersk, MSC, OOCL, and Yang Ming Marine Transport have either paused shipping through the Red Sea or rerouted vessels due to safety concerns.

New attacks

The United Kingdom Maritime Trade Operations reported a series of new incidents this week.

According to the UK-based EOS Risk Group, there were at least four new incidents on Monday alone including attacks against the containership MSC Clara and the Norwegian-owned Swan Atlantic tanker as claimed by the Houthis.

The US Central Command later confirmed that a Houthi ballistic missile struck the Swan Atlantic tanker and a separate attack on MSC Clara, which ultimately missed the ship.

Over the weekend, two shipping companies, MV Al Jasrah and M/V Platinum 3, were confirmed to be attacked early Saturday morning (local time) by Houthi forces, following a warning to the M/V MSC Alanya to change course.

No injuries were reported, and the ships are now safe. The Al JasrahH and Platinum 3 experienced fires caused by the attacks, but the fires have been extinguished and no further assistance is needed, according to the US Central Command.

Oil market ‘taking more notice’

There is little to suggest that the Houthi attacks will stop any time soon.

Colby Connelly, a senior analyst at Energy Intelligence, a Washington-based energy information company, told Al Jazeera that there has been a “fairly limited” but “not intangible” impact of these attacks on the oil market.

“As these attacks have gone on, markets have taken more and more notice, so crude prices did end the week higher than they’ve been for the last couple of days or so, especially as these attacks don’t look like they’re going to stop until there’s a stronger effort to stop them,” he said.

Read also: Brent hits $78 on Red Sea shipping disruptions

“If the Bab el-Mandeb is constrained to oil traffic due to tensions in the region there is a good chance the price of oil to some places will go up due to a crisis and war premium on insurance and the products themselves,” said Paul Sullivan, a non-resident senior fellow at the Atlantic Council’s Global Energy Center, in an interview with Al Jazeera.

“Given the present circumstance, this is doubtful, but in the increased tensions in the region just about anything is possible. If it gets bad enough that all sorts of cargoes will be redirected around Africa, this could reconfigure many cargo contracts, including of oil and liquefied natural gas. And prices will have upward pressures. The softening of overall oil prices may mitigate that, but not for long,” Sullivan added.