Key facts
- Iran has granted Iraqi oil tankers passage through the Strait of Hormuz.
- This decision follows repeated requests from Baghdad.
- VLCC rates for Middle East-to-China voyages have exceeded $500,000 per day.
- Saudi Aramco loaded VLCCs for Asian buyers via ship-to-ship transfers off Fujairah.
- China's major shipping companies have halted transit through the Strait of Hormuz and Bab el-Mandeb.
- US diesel cracks hit an all-time high of $102 per barrel.
- The Houthis claimed a drone attack on Saudi Aramco’s Jazan refinery.
- US President Trump threatened to bomb Oman if negotiations with Iran were obstructed.
Iran has granted Iraqi oil tankers passage through the Strait of Hormuz, a move that follows repeated requests from Baghdad. This development occurs as Gulf oil producers are increasingly finding alternative routes to bypass the world's busiest oil chokepoint, leading to significant increases in tanker rates.
Very Large Crude Carrier (VLCC) prices have surged, with daily earnings for Middle East-to-China voyages reportedly exceeding $500,000. Saudi Aramco has resumed crude loadings at its Ras Tanura export terminal and is offering cargoes via ship-to-ship transfers off Fujairah in the UAE to Asian buyers, avoiding the Strait of Hormuz. Similarly, China's major shipping companies, COSCO and CMES, have stopped transiting through the Strait of Hormuz and Bab el-Mandeb, opting to collect crude from Fujairah and Oman instead.
The situation has created a lucrative freight trade, with VLCC fixing costs for inside-Hormuz cargoes jumping significantly. Market analysis indicates a high number of loaded and ballasting tankers globally, contributing to the tight supply and soaring rates. The US diesel crack has reached an all-time high of $102 per barrel, with distillate inventories at their lowest seasonal level since 1996.
Geopolitical tensions remain a factor, with the Houthis claiming a drone attack on Saudi Aramco’s Jazan refinery, which is already out of operation. Additionally, a Greek-operated tanker was attacked after loading Russian-origin crude, reviving risks in the Black Sea. US President Donald Trump has warned Oman against obstructing negotiations with Iran and has indicated measures to boost US refinery throughput. Meanwhile, navigable depth on Germany's River Rhine has fallen to a record low, halting navigation and forcing freight onto land transport.
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