VLCC freight rates soar to record highs amid rising Middle East security risks and reduced vessel traffic in the Strait of Hormuz.
Tanker freight rates have reached record levels.
Increasing security risks in the Middle East and a decrease in vessel traffic in the Strait of Hormuz have pushed the crude oil tanker market to historic levels. Freight costs for Very Large Crude Carriers (VLCC) transporting from the Gulf of Oman to China have risen to approximately $11.50 per barrel, with daily earnings on some routes reaching the $1 million mark.
The rise in freight rates is primarily due to tanker owners being more reluctant to send vessels to the region because of the increasing attacks on commercial ships in the Middle East and security concerns in the Strait of Hormuz. The rise in security risks reduces the number of available tankers, leading oil companies to pay higher prices to secure vessels.
Daily earnings approach $1 million.
According to data published by Lloyd’s List, the rise in the tanker market has not been limited to freight indices. The Baltic Exchange’s Middle East Gulf-China VLCC index has seen daily time charter equivalents rise to approximately $982,000. Clarksons Securities has calculated daily earnings for the same route to be over $1 million.
On the Oman Gulf-China route, daily VLCC earnings have surpassed $571,000, marking an increase of 113% in one week and approximately 300% in one month.
A similar trend has emerged on the West Africa-China route. VLCC earnings on this route have risen to $410,000 per day, with a monthly increase reaching 280%.
The decline in Hormuz traffic has tightened the market.
The sharp rise in tanker freight rates is significantly influenced by the decrease in transits through the Strait of Hormuz. With the rising risk of attacks in the region, some shipowners have begun to postpone their transits or turn to alternative shipping methods.
This situation has particularly reduced the efficiency of the VLCC fleet transporting crude oil from the Persian Gulf to Asia. The shift of vessels to longer routes and the use of some tankers for ship-to-ship oil transfers in the Gulf of Oman have further tightened the available tonnage in the market.
On the other hand, the increase in long-distance oil shipments from the Atlantic Basin to Asia is also causing tankers to remain on voyages for longer periods. As a result, the number of vessels that can return to the market decreases, intensifying upward pressure on freight rates.
Alternative oil routes also took a hit.
One of the recent developments increasing pressure on the market is the temporary closure of the East-West oil pipeline, which connects oil fields in eastern Saudi Arabia to Yanbu on the Red Sea coast, due to attacks.
The pipeline, which transports approximately 4 million barrels per day, was seen as one of the main alternatives for exporting oil without using the Strait of Hormuz. The pipeline's outage has further heightened concerns about bottlenecks in global oil transportation.
Bab el-Mandeb risk is also growing.
The issues in Hormuz, combined with security risks around the Red Sea and Bab el-Mandeb, are further increasing pressure on the tanker market.
Following recent developments, the rise in security concerns at critical transit points for global oil trade, such as the Strait of Hormuz and Bab el-Mandeb, has led shipowners to increase their war risk premiums and freight demands.
Reuters reported that as of September 14, tanker freight rates continued to remain at record levels, with difficulties in the supply of marine fuel also raising the cost of transporting oil by sea.
The rise in freight rates may continue.
Industry analysts point out that the tightness in tanker supply may persist as long as security conditions in the region do not return to normal.
China's resumption of crude oil stockpiling is also supporting VLCC demand. It is assessed that if the increasing demand from China combines with the security crisis in the Middle East, tanker freight rates may not have yet reached their peak.
It is noted that if high tanker costs persist for an extended period, not only shipowners and oil companies but also global economies could be affected through refinery costs and energy prices.
Source: SeaNews Türkiye
