Oil prices surge after Gulf of Oman tanker attacks

The Saudi oil tanker Al-Marzoqah was one of the four ships damaged in alleged ‘sabotage attacks’ a month earlier off the coast of Fujairah. (AFP)
Updated 13 June 2019
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Oil prices surge after Gulf of Oman tanker attacks

  • The attacks took place to the east of the Strait of Hormuz, a major strategic waterway for world oil supplies, raising fears of disruption to the global energy trade
  • They come at a time of heightened tensions over Iran’s activities in the region and after Tehran has repeatedly threatened to disrupt shipping in and out of the Arabian Gulf

LONDON: Twin attacks on tankers in the Gulf of Oman, close to the world’s biggest energy chokepoint, sent oil prices surging by as much as 4.5 percent on Thursday.

The attacks took place to the east of the Strait of Hormuz, a major strategic waterway for world oil supplies, raising fears of disruption to the global energy trade. 

They come at a time of heightened tensions over Iran’s activities in the region and after Tehran has repeatedly threatened to disrupt shipping in and out of the Arabian Gulf.

Benchmark brent crude prices were up by 1.8 percent to $61.06 at around 4 p.m. GMT, having risen as much as 4.5 percent earlier in the day.

Thursday’s attacks involved the Front Altair, which caught fire in between the coast of Iran and the UAE after an explosion, and the Japanese-owned Kokuka Courageous, which was abandoned after being hit by a suspected torpedo.

The incidents follow the “sabotage” of four commercial vessels off the coast of the UAE’s Fujairah port last month.

Robin Mills, CEO of consultancy Qamar Energy, told Arab News that Thursday’s attacks were “considerably” more serious than the Fujairah incident. 

“Security will no doubt be beefed up, but it will have to be extended further if there is any repetition of such an attack,” he said. 

The impact on oil prices came despite global exporters having the capacity to boost production if needed, Mills added. 

“On the overall market, demand growth is weakening and there is plenty of spare capacity, but most of this is in the Gulf, of course. So (it is) not surprising we saw the price response,” he said. 

Andy Lipow, an analyst at Lipow Oil Associates in Houston, said the attacks could have a further knock-on impact on the market, notably on insurance risk premiums. 

“These types of attacks have always been a concern,” he told Reuters.

“But the impact of tanker owners not chartering their vessels and insurance companies potentially refusing to provide coverage could further exacerbate the supply problem.”


RBS says Saudi bank merger boosts its core capital

Updated 16 June 2019
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RBS says Saudi bank merger boosts its core capital

  • RBS had a 15.3% interest in Alawwal bank
  • The changes would boost the banks CET1 core capital ratio by 60 basis points

Royal Bank of Scotland (RBS) said on Sunday the completion of a merger between Alawwal bank and Saudi British Bank would lead to RBS shedding $5.9 billion of risk weighted assets and boost its core capital.
RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40% equity stake in Alawwal bank, the British bank said in a statement. RBS also had an interest equivalent to a 15.3% stake in Alawwal bank.
RBS said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of almost $503 million and a reduction in risk weighted assets of nearly $5 billion.
RBS also said the deal would extinguish legacy liabilities of almost $377.
The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.
The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.
RBS, which was rescued in 2008 with a nearly $57 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.