Supertanker rates slip from record highs

Supertanker rates have seen a slight decline after reaching an all-time high earlier in October. The cost to charter a very large crude carrier (VLCC) for a voyage from the U.S. Gulf Coast to China has fallen to $634,974 per day, according to data from the Baltic Exchange cited by Reuters. This is a marginal decrease from the record high of over $637,000 per day observed on October 8.

The elevated shipping costs have been impacting demand for U.S. crude oil. Sparta Commodities’ senior oil analyst June Goh noted that rates on the Gulf Coast-China route have surged by as much as 300%, with similar increases seen on the route from the UAE’s Fujairah to Asia. Goh attributed these exorbitant increases to inefficient ship-to-ship (STS) transfer activities used to circumvent potential Strait of Hormuz closures and increased arbitrage crude flows from the Atlantic Basin to the Far East, which has reduced available tonnage.

Vitol’s chief executive described the situation as a "shipping crisis," noting that while Middle Eastern crude production is increasing, the logistical challenges are becoming more pronounced. Despite the high shipping costs, Goh suggested that the diversification of crude supplies will remain a factor, as Atlantic crude is likely to continue flowing into Asia even if arbitrage economics appear unfavorable, given the potential for disruptions in the Strait of Hormuz.