Earnings for very large crude carriers on the benchmark Middle East-to-China route have reached about $800,000 a day, the highest level on record, as war in the Gulf continues and key shipping routes are disrupted. Morgan Stanley said in a note issued Thursday that two-year tanker charter rates could rise by between 20% and 30%.
Longer routes, record costs
Tankers have been offered to transport crude from the US Gulf of Mexico to Asia for a record lump-sum fee of $29.5 million per voyage, equivalent to about $15 a barrel, before war-risk premiums or additional charges resulting from any unexpected delays.
Data analytics firm Kpler expects daily earnings for very large crude carriers, known as VLCCs, to remain above $100,000 through next year—more than double historical levels, which rarely exceeded $45,000.
Alex Grant, Equinor’s head of global trading for crude, products and liquids, said the market was facing several bottlenecks at the same time, clearly reflected in freight rates.
Transit through the Strait of Hormuz declines
Brent crude rose above $100 a barrel this week for the first time since July, after attacks resumed in the Strait of Hormuz, taking its gains to more than 40% since the war began. Meanwhile, the Baltic Exchange’s index of VLCC earnings more than doubled during the war.
Transit through the Strait of Hormuz has declined since fighting began, but some shipowners have continued sailing under a shuttle system, in which tankers wait in the Gulf of Oman to take on cargoes. The mechanism has allowed about 10 million barrels a day to continue flowing, according to the chief executive of Vitol, despite relying on a limited number of vessels and carrying higher costs.
The Baltic Exchange estimated that daily earnings on the Gulf of Oman-to-East Asia route had risen 85% to nearly $386,000.
Red Sea attacks lengthen voyages
Attacks by the Houthis in the Red Sea and the Bab el-Mandeb Strait have prompted some tankers to load Saudi crude at Mediterranean ports, then travel through the Suez Canal and around Africa to reach Asia, adding more than 3 weeks and millions of dollars to the cost of a voyage.
Asian buyers have increased imports of US crude in search of supplies less exposed to risk, despite higher transportation costs. Takeshi Hashimoto, president of Mitsui O.S.K. Lines, said buyers were being forced to accept higher logistics costs because they needed alternatives to Middle Eastern oil.
Gulf companies expand fleets
The crisis has prompted Gulf energy companies to expand their fleets to reduce reliance on commercial tankers. Kuwait Petroleum Corporation said it would buy more vessels, following a similar expansion by Abu Dhabi National Oil Company, or ADNOC.
