1 hr ago
Supertanker Shortage Raises Oil Costs and Threatens Global Flows
There are not enough very large ships to carry oil around the world.
Because these ships are scarce, companies must pay much more to use them.
Moving oil from the United States to Asia now costs about $26 more for each barrel.
Some refineries are choosing oil from nearby places instead of oil that travels very far.
European buyers are competing strongly for nearby crude supplies.
Tanker owners are making unusually large profits from the higher prices.
Oil traders worry that expensive shipping could make some long-distance oil purchases unprofitable.
The shipping squeeze has been worsened by conflict-related route changes and ships taking longer journeys.
A shortage of available supertankers has sharply increased the cost of transporting crude over long distances.
Shipping oil from Houston to Asia now adds about $26 per barrel, or roughly $52 million per cargo.
US-to-Asia oil flows have declined as freight costs roughly tripled, while refiners seek closer supplies.
Very large crude carriers on the Persian Gulf-to-China route are earning more than $1.2 million per day.
The surge is linked to the US-Iran conflict and a major South Korean investment that had already lifted tanker rates.
- Who
- Oil traders, refiners, tanker owners, shipbrokers and analysts are affected; companies and experts cited include Trafigura Group, Vortexa and Kpler.
- What
- A shortage of available supertankers has driven freight rates sharply higher and threatened the economics of long-distance crude-oil shipments.
- Where
- The effects are being felt globally, including on routes between Houston and Asia, the Persian Gulf and China, and across Europe.
- When
- The shipping squeeze and price increases were reported this week, with US-Asia flows falling in recent weeks.
- Why
- The US-Iran conflict has lengthened or complicated some voyages, while a major South Korean investment had already tightened the tanker market.
Tanker Owners and Freight Market
Oil Traders and Refiners
Impact of high freight rates
Tanker Owners and Freight Market
Tanker owners and ship operators are benefiting from exceptionally high earnings as available supertankers become scarce.
Oil Traders and Refiners
Oil traders and refiners face much higher delivered crude costs, which could make some long-distance purchases and refining operations uneconomical.
Response to limited supertankers
Tanker Owners and Freight Market
The tight market is supporting the use of smaller vessels and multiple ships to carry cargoes that would normally use one supertanker.
Oil Traders and Refiners
Refiners are seeking closer crude supplies, including Alaskan oil for Japan, because shorter voyages reduce shipping costs.
Effect on global oil flows
Tanker Owners and Freight Market
Higher rates reflect the extra time and distance created by route changes, vessel repositioning and cargo transfers.
Oil Traders and Refiners
If freight remains elevated, expensive arbitrage routes could close and reduce demand for long-haul barrels from places such as the United States and Angola.
Key facts
- Houston-to-Asia shipping cost
- About $26 per barrel, or approximately $52 million per cargo
- Persian Gulf-China tanker earnings
- More than $1.2 million per day for very large crude carriers
- Suezmax earnings
- Average earnings are above $300,000 per day
- US-Asia crude flows
- They have fallen in recent weeks as freight costs roughly tripled
- European Dated Brent
- Rose above $131 per barrel as buyers sought short-haul cargoes
- European diesel futures
- Near $200 per barrel
- Tanker-equity value
- The largest oil-tanker equities reached almost $70 billion this week
Quotes
Sumit Ritolia
Senior manager of modelling at analytics firm Kpler
“Current freight levels can become self-limiting over time — they eventually close arbitrage routes and reduce demand for the most expensive long-haul barrels”
CNBC TV 18
“Freight has never taken a big part of the delivered cost of oil, but it’s now playing a much bigger role in oil markets”
CNBC TV 18
Sources
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