Gulf crude shipping cost tops US$37 a barrel, five times pre-war, IEA says as two more tankers are hit

Moving crude oil out of the Gulf has become far more expensive. On 21 October, gCaptain reported a new analysis from the International Energy Agency (IEA), which said tanker rates reached historic highs in September and kept climbing into October. By mid-October, the IEA said, shipping crude from the Middle East Gulf to Asia cost more than US$37 per barrel, over five times pre-war levels.

gCaptain set out what that means for one ship. A very large crude carrier (VLCC) carrying 2 million barrels now pays more than US$74 million in freight for a single cargo, against less than US$15 million before the conflict.

A second set of numbers comes from S&P Global's Platts, reported by Hellenic Shipping News on 22 October. Platts assessed the VLCC rate for 265,000 tonnes of crude from the Persian Gulf to the west coast of India at US$95.83 per tonne on 19 October, against US$19.15 per tonne on 27 February, before the conflict. That is the route closest to Sri Lanka among the figures reported.

The oil is still moving, but by costly and roundabout routes:

• gCaptain, citing The Wall Street Journal and Kpler data, said Middle East oil shipments averaged more than 24 million barrels a day in the week to 18 October, above the pre-war average of 23.3 million.
• A Bloomberg report carried by gCaptain gave a different picture for the month as a whole. Kpler puts October-to-date flows at 16.7 million barrels a day and Vortexa at 15.4 million, both below pre-war levels. Vortexa did not see the same weekly jump, and Bloomberg noted that most tankers in the region sail with their tracking signals off, so the figures are uncertain.
• According to Kpler, about 17% of the region's crude exports bypassed Hormuz before the war. By September that share had risen to 40%, as Saudi Arabia and the UAE sent more oil through pipelines to terminals outside the strait.
• Tankers that do cross Hormuz often follow a corridor near the Omani coast under US military protection, then transfer their cargo to other ships in the Gulf of Oman.

Meanwhile the attacks have not stopped. gCaptain reported that the UK Maritime Trade Operations (UKMTO) centre recorded two more tanker strikes. One was hit about 11 nautical miles west of Bukha, Oman, at 0145 UTC on 21 October, which started a fire that has since been put out. The other was struck about 30 nautical miles southeast of Al Faw, Iraq, on 20 October. Crews on both ships were reported safe. The Joint Maritime Information Center kept its threat level for Hormuz at SEVERE and raised the wider Persian Gulf to SUBSTANTIAL. Bloomberg said UKMTO has logged 32 attacks on ships around the Arabian peninsula so far in October, compared with 16 in all of September.

Hellenic Shipping News also reported that shipbrokers are studying a US plan to let sanctioned "shadow fleet" tankers return to mainstream trade. Gibson and BRS said some of these ships could end up on Hormuz shuttle runs, which may ease the shortage of tankers there. BRS warned that this "may not drive looser oil or tanker market fundamentals". It would mostly move existing ships from one trade to another. We covered the US waiver in an earlier post.

For a fuel-importing country like Sri Lanka, higher tanker freight adds to the landed cost of fuel, on top of the crude price itself. The Platts rate to west India is a useful guide for South Asian buyers, and it is now about five times its February level.

For shippers, fuel costs pass down the chain:

• Bunker costs. Container lines and feeder operators calling at Colombo buy marine fuel refined from this crude. Expensive crude freight keeps bunker prices high, and those costs return to cargo owners as bunker surcharges.
• Local transport. Diesel prices in Sri Lanka affect trucking from Colombo port to inland warehouses and factories.
• Gulf trade lanes. War risk insurance, slower routes and anchorages crowded off Fujairah and Khor Fakkan (about 217 ships on 18 October, according to JMIC figures quoted by gCaptain) can add delay and cost to Sri Lankan cargo going to or through UAE ports.

Supply is holding up for now, but the cost of keeping it moving is high.

1. Check fuel-linked charges on new quotes. Ask your forwarder or carrier how the bunker adjustment factor and any war risk or emergency surcharge are calculated, and when they change.
2. Separate freight from fuel. When you compare rates, ask for the base ocean freight and surcharges to be shown separately so you can see what is moving.
3. Allow extra time on Gulf routings. Shipments to or through Jebel Ali, Khor Fakkan or Fujairah may face extra waiting time while the threat level stays high.
4. Watch local fuel price revisions. If you run your own trucks or pay fuel-linked haulage rates, plan for the possibility of further changes.
5. Talk to peers. Share what surcharges you are seeing on the community board, and use the container transport tool to check inland haulage costs.

Figures are as reported by the sources named. Nothing here is a rate forecast.