Supertanker rates have retreated slightly after touching an all-time high earlier this month, with the price of chartering a very large crude carrier for a trip from the Gulf Coast to China at $634,974 per day, according to Baltic Exchange data cited by Reuters.
This compared to a record of over $637,000 per day on October 8, the publication noted. The record price of transporting crude oil from the United States to Asia was undermining demand for U.S. crude.
Tanker rates have soared this year due to Middle Eastern producers taking to ship-to-ship transfers outside the Strait of Hormuz. For this, they use shuttle tankers, including smaller carriers, to sneak the oil through Hormuz and then load it on supertankers in the Gulf of Oman. As a result, supertanker rates from the Gulf to Asia hit $1.4 million daily earlier this month.
“The reasons for such exorbitant increases in VLCC freight rates are the hugely inefficient ship-to-ship (STS) activities as a workaround to the Strait of Hormuz closure and increased Atlantic Basin arbitrage crudes into the Far East, leading to lower open tonnage available,” Sparta Commodities’ senior oil analyst June Goh said last week, as quoted by Reuters.
On the Gulf Coast-China route, freight rates for VLCCs have soared by as much as 300%, Goh also said, and so have freight rates on the route from the UAE’s Fujairah to Asia. Yet the effect of shipping costs on Asian imports of U.S. crude will be limited by the lack of other options, according to Goh.
“The diversification angle for crude supplies remains in play while the flow from the Strait of Hormuz can still be disrupted, which means even if the arbitrage looks shut, there will likely be more Atlantic crude flows into Asia,” the analyst explained.
“We started this conflict with a crude crisis. Then it turned into a product crisis. Now we have more crude oil coming out of the Middle East, but it is turning into a shipping crisis,” Vitol’s chief executive described the situation at the Energy Intelligence Forum last week.
By Irina Slav for Oilprice.com
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