(Bloomberg) —
Supertankers are quickly heading to the Middle East to take advantage of high fees for transporting oil through the Strait of Hormuz. This situation is worsening the global shortage of vessels, which has driven up freight rates.
Crude oil shipments through this important waterway, connecting the Persian Gulf to global markets, have returned to almost pre-war levels in recent weeks, despite ongoing attacks on ships. Nonetheless, the risks involved in this trade have led to a surge in tanker fees; transporting oil from the Gulf to East Asia now costs over six times what it did before the conflict.
According to Signal Ocean, a shipping data provider, more than 40% of the world's fleet of about 850 very large crude carriers (VLCCs) are currently in the Persian Gulf or just a few days away from it.
This large concentration of vessels is complicated by the shuttling trade, where crude is transferred to other ships that prefer not to risk crossing Hormuz. This transfer is taking place in the Gulf of Oman or at new transshipment locations, like off the western coast of India.
“Recent months have been the best ever for crude tankers,” said Georgios Sakellariou, a freight analyst at Signal Ocean. “However, the ship-to-ship transfers outside Hormuz are inefficient, which is really straining the supply of vessels both there and elsewhere.”
Data from Signal Ocean indicates that the number of empty VLCCs heading to Atlantic ports has dropped by half compared to last month. This shortage of supertankers is shifting the makeup of the oil fleet in other regions, increasing the reliance on smaller vessels that lack the economies of scale enjoyed by larger carriers.
Meanwhile, crude producers outside the Middle East, especially in the Americas, are maintaining high production levels even as shipments from the Persian Gulf recover. This situation is impacting oil freight markets globally and driving up already high fees.
This week, at least one VLCC was offered for a trip from the US Gulf to Japan at a potential record fee of $82 million, which translates to over $40 per barrel. This represents an increase of more than 50% on the route compared to just three weeks ago.
For the journey from the Persian Gulf to East Asia, which takes about three weeks, supertanker rates reached a record high of nearly $1.4 million per day on Wednesday. This marks a staggering increase of almost 540% since before the war, while Brent oil prices have only risen about 40% during the same period.
The high demand and exorbitant fees for supertankers have led to a shift towards using smaller Suezmax and Aframax vessels for routes outside the Middle East. So far, most contracts for carrying US oil to Asia in November involve these smaller ships, which is driving up their costs as well.
“The smaller counterparts of VLCCs, Suezmax and Aframax, are also showing no signs of slowing down, leaving virtually no options for shippers right now,” noted shipbroker Fearnleys in a report on Monday.