The oil crisis has extended into the shipping sector with a large tanker fleet tied up in ship-to-ship transfers outside the Strait of Hormuz, pushing global freight rates to record highs and reducing vessel availability for other routes.
Supertanker rates have soared in recent weeks, and hit a record-high of $1.4 million per day on the Gulf to East Asia trip, according to data compiled by Bloomberg.
Rates on the U.S. Gulf-to-Japan route are also skyrocketing and one supertanker, the so-called very large crude carrier (VLCC) capable of shipping up to 2 million barrels of oil, has been reportedly offered at a total fee of $82 million for the journey, up by 50% from just three weeks ago, Bloomberg reports.
Many tankers of the global fleet are now engaged in the STS transfers outside the Strait of Hormuz and with flows rebounding, more are tied up on this route, leaving the rest of the market very low on vessels to ship oil from other parts of the world.
The shuttle-shipping through the Strait of Hormuz is “very inefficient,” Russell Hardy, chief executive officer at the world’s biggest independent oil trader, Vitol, said at the Energy Intelligence Forum in London this week.
“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,” Hardy added.
“There is really not quite enough shipping to go around,” the executive noted.
The supertanker crunch has prompted a rally in daily rates for smaller vessels such as Aframax and Suezmax, too, as oil producers and buyers are moving into the smaller vessel market amid very tight supertanker availability.
“Oil supply continues to increase, and shipping data shows regional crude exports from the Middle East actually exceeded pre-war levels on several days in late September,” shipbroker Fearnleys said in its weekly report on Wednesday.
“The VLCCs smaller sisters, Suez- and Aframaxes, are showing no sign of slowing down either so there’s really nowhere to hide right now,” Fearnleys analysts said.
By Charles Kennedy for Oilprice.com
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