Key facts
- VLCC charter rates have reached a record $647,000 per day.
- Increased Persian Gulf oil shipments are driving up rates.
- Saudi Aramco is using ship-to-ship transfers to deliver crude to China.
- This strategy bypasses the Strait of Hormuz for buyers.
- Houthi attacks in the Red Sea are also impacting shipping routes.
Super tanker earnings have surged to a record $647,000 per day, driven by increased Persian Gulf oil shipments through the Strait of Hormuz amidst ongoing conflict. This surge is attributed to a competition for a smaller pool of vessels willing to transit the strait, creating a significant premium for those taking the risk.
Saudi Aramco is implementing a strategy of ship-to-ship transfers outside the Strait of Hormuz to deliver crude to Asian buyers, particularly China. This involves transferring crude to another tanker off Fujairah in the UAE or Sohar in Oman, allowing buyers to receive their cargo without their own vessels entering the dangerous strait. This arrangement has been used for Arab Medium and Arab Heavy crude sales for two consecutive weeks.
Two Very Large Crude Carriers (VLCCs) carrying a combined 4 million barrels of Saudi crude are en route to China after receiving cargoes via these transfers off Sohar. One is expected at Ningbo on September 15 and the other at Zhanjiang on September 12, both destined for Sinopec.
This strategy represents an evolution in Saudi Arabia's efforts to maintain crude flow despite compromised export corridors. Aramco had previously resumed loading tankers at Ras Tanura and Juaymah after a pause and has been routing more crude west via the East-West pipeline and Egypt’s Sidi Kerir terminal for European customers. However, for Asian buyers like China, the Strait of Hormuz remains a critical transit route.
Even outside the strait, shipping rates are climbing, with a tanker traveling from Oman to China now commanding approximately $220,000 per day, up from $131,000 a month ago. The situation is exacerbated by Houthi attacks in the Red Sea, which have forced some rerouting of Saudi barrels around Africa, adding about 30 days to voyages to Asia.