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Markets ignore the dangers of a Middle East oil rift at their peril

Saudi Arabia’s decision to stop its oil tankers temporarily entering the Red Sea is a shock but prices have hardly moved. The  move follows repeated attacks by militants from Yemen on the country’s giant tankers vessels entering the waterway. In a volatile region like the Middle East, ignoring the risks to oil tanker traffic looks reckless. Almost 5m barrels of crude and refined petroleum products are shipped daily t into the Red Sea, where a large proportion are unloaded at the Egyptian port of Ain Sukhna. From there, around 1.5m barrels per day continue into the European markets through the Sumed pipeline, which provides the bulk of the region’s vital crude imports. No other shipping using the route is affected but the state-owned company’s caution is understandable as the VLCCs can carry 2m barrels and the kingdom ships about 10pc of its total crude exports to Europe through the Red Sea. Saudi Arabia’s exports in June averaged around 7.5m barrels per day. Despite the risks, oil prices have delivered a muted response to the growing geopolitical issues in the Middle East, with crude currently trading just below $75 per barrel.

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