The cost of chartering a very large crude carrier has exceeded 1.2 million dollars a day on shipping routes between the Middle East and Asia, as shipping through the Strait of Hormuz has been disrupted by the US-Israeli war on Iran, adding to pressure on energy markets facing supply shortages.
The disruption to shipping through the strait, after the war broke out at the end of February, has forced vessels to reroute and travel longer distances, reducing the number of very large crude carriers available on the market.
Longer distances and a tanker shortage
Braemar Shipping said freight rates between the Middle East and China had doubled since late August for very large crude carriers, which have a capacity of around 2 million barrels of oil. Rates for these tankers between Brazil and China also more than doubled in the past week.
Before the war broke out, a shortage of oil tankers drove the cost of shipping Gulf cargoes to a record 120,000 dollars a day in February, according to data from the Baltic Exchange, which assesses freight rates.
Shipping costs rose after Asian refineries were forced to seek crude supplies from more distant regions as Middle Eastern oil supplies declined, keeping vessels occupied for longer periods and reducing the available supply of tankers.
Martijn Rats, an analyst at Morgan Stanley, said Indian refineries were buying crude from Brazil, West Africa and the North Sea, on sea voyages lasting between 30 and 40 days.
Pressure on Asian refineries
The sharp increase in oil transportation costs has prompted some Asian refineries to begin cutting output as their profitability declines, while oil product prices have reached record levels. Diesel prices in Singapore stood at around 180 dollars a barrel, while they exceeded 200 dollars a barrel in both the United States and Europe.
Clarksons Shipping estimated that around 15% of the global oil tanker fleet was waiting in the Gulf of Hormuz, off the Omani coast, helping reduce the number of available tankers and drive up their cost.
Shipping companies expand fleets
The rise in oil freight rates to unprecedented levels has prompted some oil and shipping companies to seek to expand their fleets of very large crude carriers and smaller vessels, including Suezmax tankers designed to transit the Suez Canal.
Swiss commodities trader Trafigura said on Monday that it had launched Vular Shipping, which will own and operate 14 very large crude carriers, adding that it plans to sell shares in the company ahead of its listing on the Norwegian stock exchange next month.
Trafigura added that Vular currently operates six very large crude carriers and has ordered eight new vessels of the same class, due for delivery between 2026 and 2028.
Commodity trading companies, including Trafigura, have historically relied on chartering tankers from independent shipowners to transport oil, leaving them exposed to rising freight rates in the market.
