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European Oil Markets
31JUL

Insurers shut Bab el-Mandeb to Saudi hulls

3 min read
09:33UTC

Marine war-risk underwriters pulled cover from Saudi-linked vessels crossing Bab el-Mandeb on 24 July, and tanker transits through the strait have thinned to about 7.5 a day. Eni's second-quarter results, approved 29 July, put that freight dislocation into a refiner's accounts, naming higher shipping cost as a cap on a margin scenario it more than doubled. Managed money flipped Brent net long in the same week.

EconomicEniEIA
Key takeaway

Bab el-Mandeb's collapse is underwriting-driven, not war-driven, and Eni now prices that cost into its margin.

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Economic
Regulatory

A Windward assessment dated 30 July put Saudi-linked tanker transits through Bab el-Mandeb down 46% after Lloyd's-market war-risk cover for those hulls lapsed on 24 July. Total crossings are down 22% since the blockade declaration.

Sources profile:This story draws on neutral-leaning sources
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A Windward maritime-risk assessment republished by Hellenic Shipping News on 30 July quantified the Bab el-Mandeb tanker collapse for the first time, putting Total crossings down 22% since the 20 July blockade declaration (about 47.8 to 37.2 a day), tanker transits down 39%, and Saudi-linked tanker transits down 46% to roughly 7.5 a day after Lloyd's-market war-risk cover lapsed on 24 July, while noting three Chinese-linked supertankers crossed unmolested on 23 and 24 July.

The route from Saudi Arabia's western terminals to Mediterranean refineries has thinned on an underwriting decision rather than on a strike, and withdrawn cover reverses far more slowly than a premium. 

Sources:Hellenic Shipping News
1 Hellenic Shipping News2 Hellenic Shipping News3 Hellenic Shipping News

Eni's board approved second-quarter results on 29 July showing refining back in profit at EUR0.08bn, with higher shipping cost named in the same sentence as the margin improvement that produced it.

Sources profile:This story draws on neutral-leaning sources
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Eni's board approved second-quarter 2026 results on 29 July showing refining proforma adjusted EBIT of EUR0.08bn, reversing a year-ago loss, with management naming higher shipping cost and narrowing heavy/sour-to-light/sweet differentials as a cap on the improved margin scenario; Eni raised its full-year SERM refining margin scenario to $14/bbl against a $6/bbl budget as group proforma adjusted EBIT doubled to EUR5.375bn.

Eni is the first European refiner to write the Red Sea freight dislocation into a published margin commentary rather than leaving it on a broker's screen. 

Sources:Eni SpA
1 Eni SpA2 Eni SpA3 Eni SpA

Managed money on the Brent Last Day contract held 15,665 lots long against 1,410 short in the week to 21 July, the first positioning print of this cycle to confirm the rally instead of fading it.

Sources profile:This story draws on neutral-leaning sources
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The Brent Last Day contract (code 06765T) carried its first net long speculative position of the rally in the week to 21 July: 15,665 contracts long against 1,410 short, a net long of 14,255, per CFTC data published 24 July. Managed money had been positioned short the week before, so this is the first print this cycle to confirm the rally rather than fade it.

Speculative positioning and the physical Red Sea story have realigned for the first time this cycle, and the short base that fuelled July's move is now spent. 

Sources:Commodity Futures Trading Commission
1 Commodity Futures Trading Commission

The EIA's report for the week to 24 July, released 29 July, showed commercial crude stocks down 7.2 million barrels to 404.5 million while WTI at Cushing spiked to $91.74 and handed most of it back within three sessions.

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The EIA's weekly petroleum status report, released 29 July for the week ending 24 July, showed US commercial crude stocks fell 7.2 million barrels to 404.5 million (about 7% below the five-year average), distillate stocks rose 1.1 million barrels to 110.6 million (about 10% below the five-year average), refinery utilisation ran 97.2% on crude runs of 17.3m b/d, and WTI at Cushing spiked to $91.74/bbl on 24 July, up $8.31 on the week, before giving most of that back by 27 July.

The US barrel count tightened in the same week the war premium drained out of the flat price, which puts the durable position in freight rather than on the screen. 

Sources:US Energy Information Administration
1 US Energy Information Administration2 US Energy Information Administration3 US Energy Information Administration

OFAC amended FAQ 1224 on 24 July, publishing for the first time what any licence to sell Lukoil International GmbH would have to satisfy: a clean break, blocked residual funds, and no up-front value to Lukoil.

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OFAC amended FAQ 1224 on 24 July, alongside general licence 131H, publishing for the first time the conditions any future licence to effectuate a sale of Lukoil International GmbH would have to satisfy: complete severance of the sold business from Lukoil, residual funds owed to Lukoil blocked in a US-jurisdiction account until sanctions lift, and no windfall to Lukoil, which rules out up-front value through asset or share swaps.

After eight monthly rollovers that told the market only that the clock keeps turning, there is now a published standard a bidder can price against. 

Sources:US Treasury Office of Foreign Assets Control
1 US Treasury Office of Foreign Assets Control

Reuters reported on 28 July, citing sources, that the OPEC+ subgroup is likely to stop its monthly output increases after the September tranche. No producer has said so on the record.

Sources profile:This story draws on centre-leaning sources from United Kingdom
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Reuters reported on 28 July, citing sources, that the OPEC+ subgroup is likely to pause its monthly output increases after the September tranche, which would end the run of monthly increases this desk has tracked since June; no first-party OPEC or member-state statement was obtained and OPEC's own press pages returned repeated 403 errors.

A pause would remove the one predictable supply increment a European crude book could plan around into the fourth quarter. 

Sources:Reuters
1 Reuters
Different Perspectives
Eni
Eni
Eni's board approved second-quarter results on 29 July, swinging refining EBIT to a EUR0.08bn profit from a year-earlier loss even as group profit doubled, and named Red Sea freight cost as a cap on that improvement. A refiner absorbing higher shipping costs on Saudi-linked crude while its numbers improve treats the freight line as a drag, not a crisis.
Tanker owners on the Bab el-Mandeb route
Tanker owners on the Bab el-Mandeb route
Lloyd's-market syndicates withdrew war-risk cover from Saudi-linked hulls on 24 July, leaving owners of that class of vessel to sail Bab el-Mandeb uninsured or not at all. Tanker transits on the route fell to roughly 7.5 a day, and cover, once withdrawn, does not return on a shipowner's timetable.
Saudi crude exporters
Saudi crude exporters
Saudi-linked tanker transits through Bab el-Mandeb fell to about 7.5 a day after the 24 July underwriting withdrawal, pushing more barrels onto the longer route round the Cape or through the Yanbu terminal. Every diverted barrel ties up a ship for longer, and a fleet that turns slower charges more.
Managed-money funds on Brent Last Day
Managed-money funds on Brent Last Day
CFTC data for the week to 21 July showed managed money flipping 74,400 contracts to a net long of 15,665 against 1,410 short on the Brent Last Day contract, code 06765T. A fund that held that short through July has now covered it, and the spent short base raises the bar for the next leg higher.
Sanctions compliance officer reviewing a Lukoil International GmbH bid
Sanctions compliance officer reviewing a Lukoil International GmbH bid
OFAC's amended FAQ 1224 gives a compliance desk its first published standard: full severance from Lukoil and a US-jurisdiction blocked account for sale proceeds. The conditions name neither ISAB nor Italy, so a Priolo Gargallo-linked bid answers a different question than a Neftochim Burgas or Petrotel Ploiesti one.