Wet Barrel Market Analysis

The transportation of petroleum represents one of the most strategically flow of resources in the global economy. International seaborne trade of 2013 accounted to 9,548 millions out of which 2,844 Millions (29.8%) tons loaded represents the Tanker trade (crude oil, petroleum product and gas).

Oil is a vital source of energy for the world and will likely remain so for many decades to come. Despite the recent development and the growth of alternative energy sources (Sun-Wind-Solar) oil will remain the dominant commodity for energy for the years to come. Most countries are significantly affected by developments in the oil market, either as producers, consumers, or both. Crude oil, petroleum products and gas are strictly correlated with the development

The paper barrel market looks to the wet barrel market to see if there is an expected shortage or surplus, and reacts accordingly. Problems with maritime choke points, real or expected, have an impact on both markets. A loss of physical supply would affect the wet barrel market by creating shortages. The effect in terms of price and price volatility would depend on how much and what type of crude oil has been lost from supply, and how much spare capacity and/or what stocks exist elsewhere to replace the loss, and the time-frame (ton/mile) needed to do

Strategically and economically one of the most important waterways in the world is the Suez Canal which is located in Egypt, and connects Port Said on the Mediterranean Sea with the port of Suez on the Red Sea. The Suez Canal provides an essentially direct route for transport of goods between Asia and Europe.

The Suez Canal carries about 2.5 percent of world oil output. Possible closure of the Suez Canal would divert oil tankers around the southern tip of Africa, the Cape of Good Hope, adding approximately 6,000 miles to transit, increasing both costs and shipping time.

From 1967 until 1975, Egypt government kept the canal closed in response to Israel’s seizure of Arab territory (Six Day War), forcing tankers to travel around the Cape of Good Hope. This decision, lead to physical supply shortages of oil (short-term) and price has increased to 55 dollars per barrel from a stable price of 15-20 dollars between the years 1930-1967.

International energy markets depend on reliable transport routes. Blocking a chokepoint, even temporarily, can lead to substantial increases in total energy costs and world energy prices. Chokepoints also leave oil tankers vulnerable to theft from pirates, terrorist attacks, shipping accidents that can lead to disastrous oil spills, and political unrest in the form of wars or