Key facts
- VLCC daily freight rates hit a record $1.27 million on Monday.
- Saudi Arabia is diverting crude oil flows to Oman due to Houthi attacks.
- Ship-to-ship transfer capacity off Oman is at its limit.
- Saudi Arabia has sold about 60 million barrels of crude for delivery this month and in October.
- Daily crude transfer volume off Oman averaged 3.6 million barrels in September, up from 900,000 in August.
Very large crude carrier (VLCC) rates have reached a record $1.27 million per day as Saudi Arabia reroutes its oil exports through Oman due to ongoing Houthi attacks, according to Reuters, citing unnamed trading sources and analysts. The capacity for ship-to-ship transfers off the coast of Oman has been maxed out by this diversion.
Saudi Arabia has reportedly sold approximately 60 million barrels of crude for shipment this month and in October, which will be transferred from smaller vessels to supertankers in the Gulf of Oman. This has tightened the already constrained VLCC market and driven up shipping costs.
The ship-to-ship transfer process involves loading crude in the Persian Gulf, transporting it through the Strait of Hormuz, and then offloading it onto larger tankers in the Gulf of Oman. Kpler data indicates that daily crude transfer volumes off Oman have averaged 3.6 million barrels in September, a significant increase from 900,000 barrels per day in August, prior to the Houthi attacks on the East-West pipeline.
Kpler analyst Panagiotis Krontiras stated that this volume requires between 36 and 40 additional VLCCs for shuttle runs alone. Anoop Singh, head of global shipping research at Oil Brokerage, noted that exporting the same amount of oil in September as in August now necessitates 40 VLCCs due to the ship-to-ship transfers, compared to 24 VLCCs previously.
Adding to the tanker supply crunch, 20 vessels are currently waiting in the Red Sea for operations at the port of Yanbu to resume. The scarcity of tanker availability has propelled daily VLCC freight rates to an unprecedented $1.27 million as of Monday, according to LSEG data cited by Reuters.