Red Sea Tensions Push Tanker Freight Up 60%: Caribbean Becomes a Pivot Point

Persistent Houthi attacks on commercial shipping in the southern Red Sea and the Bab el-Mandeb strait have driven tanker freight rates up by roughly 60% since the start of the disruption, according to data from Baltic Exchange and Clarksons Research. Very Large Crude Carrier (VLCC) Worldscale ratings on the Middle East-to-China route have climbed sharply, while clean tanker rates on the Long Range 2 (LR2) routes from the Middle East to Europe have hit multi-year highs.

The disruption has forced an estimated 70% of oil and product tankers that previously transited the Red Sea and Suez Canal to reroute around the Cape of Good Hope, adding 10 to 14 days and roughly 3,500 nautical miles to each voyage. The Suez Canal Authority has reported a 50% year-on-year decline in transit revenues, while shipping insurers including Lloyd's of London have imposed war risk premiums of up to 1% of hull value on Red Sea transits.

For Trinidad and Tobago, the rerouting of global oil flows has created both opportunities and risks. Atlantic LNG cargoes destined for European buyers benefit from shorter freight differentials versus Qatari LNG, which must now sail the longer Cape route. Trinidad LNG can reach Rotterdam and Zeebrugge in roughly 10 days, compared with 25 to 30 days for Qatari cargoes via the Cape. This freight advantage has supported netback prices for Shell and BP cargoes loaded at Point Fortin.

On the crude side, the impact is more nuanced. Trinidad's small crude export programme, managed by Heritage Petroleum, ships primarily to the US Gulf Coast and Latin American refiners. The reshaping of Atlantic Basin flows has tightened supply for medium-sweet grades, supporting Brent-WTI spreads and lifting realisations for Trinidad's Galeota stream. However, the higher cost of imported diesel, gasoline and jet fuel into Pointe-a-Pierre and Point Fortin has increased the working capital burden on Paria Fuel Trading.

The petrochemicals sector at Point Lisas has also felt the shipping squeeze. Methanex, Yara, Nutrien and Proman ship roughly 10 million tonnes per year of methanol, ammonia and urea to global markets, with significant exposure to European and Asian destinations. Freight rates for chemical tankers and gas carriers have risen in sympathy with crude rates, eroding margins on long-haul cargoes. Industry sources estimate that freight cost increases have shaved 5 to 8% off realised margins for ammonia exports to Europe.

The Port of Port of Spain and the Point Lisas Industrial Port have seen modest increases in transhipment activity as shipping lines reconfigure their networks. The Caribbean's role as a pivot point between the Atlantic Basin, the US Gulf and the Panama Canal is gaining renewed strategic importance, with implications for port infrastructure investment and bunkering services.

For T&T policymakers, the Red Sea disruption underscores the need for resilient supply chains, diversified shipping partners and competitive port infrastructure. The Ministry of Works and Transport has accelerated discussions on dredging the Port of Port of Spain to accommodate larger vessels, while NGC explores opportunities to expand LNG bunkering services for vessels rerouting via the Caribbean.