Key facts
- Shipping costs from U.S. Gulf Coast to Asia have surged tenfold to record highs due to the Iran war.
- Asian refiner orders for U.S. crude have plunged 50% in October, potentially leading to the lowest volumes in seven years.
- Record tanker rates are causing dislocations in global crude pricing, with refiners seeking closer barrels and sellers discounting long-haul crudes.
- West African crude prices have hit record-low discounts of up to minus $20 per barrel to offset high shipping costs.
The Iran war has severely disrupted global oil tanker logistics, driving freight costs to record highs and making it economically unviable to ship crude oil from the U.S. Gulf Coast to Asia. Voyages have become so inefficient that vessel availability has crumbled, with costs soaring tenfold compared to pre-conflict levels. Earlier this month, shipping crude from the U.S. Gulf Coast to China reached as high as $80 million, and this week remained around $60 million for a supertanker. This surge has led Asian refiners to drastically cut orders for U.S. crude for November delivery, potentially resulting in the lowest volumes in seven years. The conflict and efforts to move oil out of the Strait of Hormuz have tied up supertankers in lengthy voyages, limiting their availability for other key trade routes. The increased demand for oil from closer regions like the Middle East and Europe is pushing up premiums for those grades, while U.S. and African crudes face significant discounts due to high freight costs.