Key facts
- Soaring shipping costs are forcing oil producers to slash prices for their crude.
- Delivered prices are exceeding what refiners are willing to pay.
- Producers are committing barrels for future loading at prices that leave little room for current freight bills.
- The pressure is most pronounced in the Middle East, with freight to China reaching $33/bbl by late September.
- Landed costs to China from the Middle Eastern Gulf are around $140/bbl.
- Saudi Aramco has set its November OSP for Arab Light at a $5/bbl discount to Oman/Dubai to offset shipping costs.
Soaring shipping costs are reshaping global oil trade, forcing producers to slash prices for their crude as delivered prices exceed refiners' willingness to pay. This pressure is most pronounced in the Middle East, where VLCC rates from the Gulf to China surged to $33/bbl by late September, pushing landed costs to around $140/bbl. Saudi Aramco has set its November OSP for Arab Light at a $5/bbl discount to Oman/Dubai to partially offset shipping expenses. Producers are increasingly committing barrels for future loading at prices that leave little room for current freight bills, with their returns dependent on shipping costs easing before cargoes sail. Similar pressures are affecting producers in Brazil and West Africa, leading to shifts in trade patterns with India absorbing more Latin American and West African crude due to lower transport costs compared to China.