Merchant ships are bypassing the Cape of Good Hope to avoid the risks of Red Sea waters, and longer routes are reshaping the oil trade.
In the first five months of 2024, shipments of crude oil and refined products around the Cape of Good Hope, which had averaged 5.9 million barrels a day, surged to 8.7 million barrels, a 47 percent increase, according to the U.S. Energy Information Administration.
Data from the US Energy Agency shed further light on the details behind this shift. Saudi Arabia and Iraq, the main oil producers in the Middle East, rerouted crude destined for Europe through the Cape of Good Hope rather than via the Suez Canal. This portion of the diverted crude oil accounted for 15% of the total increase. Meanwhile, refiners in Asia and the Middle East have also ramped up exports of refined products to Europe, contributing 29 percent of the growth in trade through the Cape of Good Hope.
The United States has also adjusted the pattern of oil trade, beginning to receive more crude oil and refined oil products from the Middle East and Asia through the Cape of Good Hope, while exporting more refined oil products to Asia through the Cape. Compared to the 2023 average, total U.S. oil trade through the Cape of Good Hope has increased by a third, to about 600,000 barrels per day.
It is worth noting that although Russia is not directly affected by the situation in the Red Sea, its shipments of crude oil and refined products to Asia via the Cape of Good Hope have also increased fourfold compared to 2023.
The decision to bypass the Cape of Good Hope was not without cost. Shipping times have almost doubled, with the journey from the Arabian Sea to Europe taking about 15 days longer via the Cape of Good Hope than via the Bab el-Mandeb Strait and the Suez Canal, inevitably leading to higher transport costs and delays.
Yet geopolitical considerations often trump economic ones. The Houthi attacks have left merchant shipping companies wary of taking risks, opting to bypass the Cape of Good Hope as a safer solution, even if it means higher costs and longer shipping cycles.
Behind this shipping boom around the Cape of Good Hope is the intricate international situation and geopolitical game. Tensions in the Middle East, like the specter of the Strait of Hormuz, threaten the safety of maritime transport and force the global shipping industry to re-examine the security of trade routes.
In the long term, a rush around the Cape of Good Hope could reshape global shipping. Some trade routes that used to depend on the Suez Canal may be diverted to the Cape of Good Hope, affecting the interests of related ports and shipping companies. The changing situation in the Middle East may further intensify the geopolitical game and pose a challenge to global energy security.
