IEA says Gulf oil shipping costs top $37 a barrel

Shipping crude from the Middle East Gulf to Asia on a large tanker cost more than $37 per barrel by mid-October, over five times what it cost before the war began, the International Energy Agency said in a commentary published Wednesday, Oct. 21. The agency said tanker rates reached historic highs in September and that shipping costs are now adding pressure to global oil markets. A very large crude carrier (VLCC) holds about 2 million barrels, so freight for one cargo now runs above $74 million, compared with less than $15 million before the conflict, according to gCaptain.gcaptain.com+1

The IEA said VLCC charter rates on the Gulf-to-Asia route rose above $1.3 million a day. Higher delivered crude costs pushed margins for Asian refiners processing Middle Eastern crude into negative territory in September. Data from Kpler showed freight for a supertanker carrying Gulf crude to China nearing a record $37.37 per barrel this week, as reported by The Times of India, which cited The Wall Street Journal.iea.org+1

Why rates are surging

The IEA traced the rise to congestion around the Strait of Hormuz, rerouted trade and more ship-to-ship transfers, all of which make deliveries take longer and leave fewer vessels free for hire. The latest jump came after drone attacks on Sept. 11 hit Saudi Arabia's East-West pipeline, which forced more Saudi oil through Hormuz while Chinese buying picked up.iea.org

Higher rates have spread to other routes. Suezmax rates from West Africa to Europe topped $22 per barrel, and product tanker rates from the Gulf to Japan neared $27 per barrel. Shipping US crude from the Gulf Coast to Singapore costs about $33 per barrel, so refiners have little room to save by switching suppliers, the agency said.

Flows hold despite attacks

Oil is still moving in large volumes even as costs climb. Crude and condensate flows from the Persian Gulf reached 24.6 million barrels a day in the week to Oct. 18, according to Kpler data reported by Bloomberg. Rival tracker Vortexa estimated only 18 million barrels a day for the same week, and both firms put October-to-date averages below prewar levels. UK Maritime Trade Operations has reported 32 attacks on ships around the Arabian Peninsula so far this month, up from 16 in all of September.bloomberg.com+1

Kpler estimated that about 40% of non-Iranian Gulf crude bypassed Hormuz in September, up from 17% before the war. "Volumes remain high despite rising attacks, because profits make it worth the risk," said Homayoun Falakshahi, Kpler's head of crude oil analysis.seekingalpha.com

The IEA cautioned that even if security in the Gulf improves, high export volumes, efforts to rebuild depleted stocks and inefficient shipping routes "could continue to constrain tanker availability and keep shipping rates elevated for some time".iea.org