Key facts
- Vitol CEO Russell Hardy stated that $200 a barrel oil is a possible scenario without ship-to-ship transfers in the Gulf of Oman.
- Ship-to-ship transfers are helping maintain oil flows from the Middle East, with around 12 million bpd of crude oil leaving the region in the past 7-10 days.
- The number of attacks on tankers around the Strait of Hormuz has jumped recently.
- Shipping costs for buyers and refiners are soaring, with average global crude vessel earnings exceeding $500,000 per day in early October.
- Crude shipments from Saudi Arabia's Ras Tanura to Rotterdam cost over $35 a barrel in September, up from about $2 per barrel last year.
Ship-to-ship transfers in the Gulf of Oman are critical for maintaining oil flows from the Middle East and preventing a potential $200 a barrel crude oil price, according to Russell Hardy, chief executive officer at Vitol Group, the world's largest independent oil trader.
Hardy stated at the Energy Intelligence Forum in London that without these transfers, which allow oil to bypass the Strait of Hormuz by reloading onto larger tankers, the market faces a significant price spike. He noted that there are no longer substantial inventories in the West to absorb such a shock.
Recent weeks have seen a surge in these ship-to-ship transfers. Vitol's data indicates that approximately 12 million barrels per day of crude oil and 2 million barrels per day of products left the Middle East in the 7-10 days prior to the forum. While these volumes are below pre-war levels, their continuation is deemed essential for price stability.
Any disruption to shipping conditions in and around the Strait of Hormuz risks trapping oil and reducing the volume of barrels transiting the chokepoint. The number of attacks on tankers in the area has increased, threatening oil exporters and potentially driving prices higher. In the week ending October 5, at least 12 attacks on oil, LNG, and LPG tankers were reported near the Strait of Hormuz, according to maritime security sources analyzed by Reuters.
The US Navy-led Joint Maritime Information Center noted persistent activity from the IRGC, including drone overflights and surveillance of merchant shipping, demonstrating Iran's intent to assert presence in key transit lanes. While ship-to-ship transfers are helping maintain crude oil flows, fuel shipments have significantly decreased since March, contributing to upward pressure on the global fuel and crude oil markets.
Hardy also highlighted the inefficiency of these transfers for the global tanker fleet, as many vessels are tied up waiting for cargoes for extended periods. This reduces tanker availability on other routes and has led to record-high freight rates. He described the situation as a "shipping crisis" rather than just a crude or product crisis, with insufficient shipping capacity to meet demand.
Consequently, shipping costs for buyers and refiners are escalating, making cost calculations difficult. Rico Luman, a senior sector economist at ING, noted in a recent report that average global crude vessel earnings exceeded $500,000 per day in early October, a tenfold increase compared to the 2025 average. Suezmax and very large crude carrier (VLCC) rates have been even higher. For instance, shipping costs from Saudi Arabia's Ras Tanura to Rotterdam surged to over $35 a barrel in September from about $2 per barrel the previous year. Luman attributed these soaring rates to restructured oil flows, the demand for capacity under military protection, and elevated insurance premiums in risky war zones, stating that this spike surpasses previous levels seen in volatile markets.