Key facts
- Oil tanker rates have surged to record highs due to escalating risks in the Middle East.
- The benchmark daily rate for a VLCC shipping oil from the Middle East to China reached nearly $800,000.
- Chartering a supertanker from the U.S. Gulf Coast to Asia now costs $29.5 million per run.
- Geopolitical tensions and attacks on shipping routes are driving up oil prices and tanker rates.
- European natural gas prices are at their highest since 2022 amid low inventories.
Oil tanker rates have jumped to record highs as escalating risks to shipping in and out of the Middle East prompt traders and tanker operators to undertake inefficient and more expensive trade routes. While crude oil supply remains available, shipping it through the Strait of Hormuz has become a risky endeavor due to increased U.S.-Iran tanker tensions and attacks in the Persian Gulf and Gulf of Oman.
These longer workarounds are tying up tankers for extended periods, tightening the market for available vessels and causing rates to skyrocket. For instance, the benchmark daily rate for a very large crude carrier (VLCC) to ship oil from the Middle East to China has reached a record high of almost $800,000, according to Bloomberg data. The price to charter a supertanker for crude from the U.S. Gulf Coast to Asia has hit $29.5 million per run, not including additional war risk fees or potential delays.
Shipbroker Fearnleys noted in its latest report that VLCC positions are so tight that the WS 400 mark for a Fujairah/East run could be breached soon. The broker added that "the oil still needs to get out through the Strait of Hormuz, and Iranians have increased efforts to stop that from happening. It’s a fragile state of affairs."
Alex Grant, Equinor’s global head of crude, products and liquids trading, told Bloomberg that "there’s quite a few bottlenecks all at the same time" and that "the market is quite stressed with all of that, and that’s showing up in the shipping rates."