Supertanker freight rates on Persian Gulf–East Asia routes have climbed above $1.4 million a day, setting a new record as the Iran war disrupts oil transportation, ties up vessels and drives shipping costs sharply higher across global crude markets.
Rates rose by 40% in the first week of October alone, surpassing September’s previous record of more than $1 million a day for voyages from the Persian Gulf to China, according to data compiled by Bloomberg. The escalation has extended beyond Middle Eastern routes, with shipments from the US Gulf Coast to Asia also becoming substantially more expensive as the availability of large tankers tightens.
The shortage is being driven partly by ship-to-ship (STS) transfers in the Gulf of Oman, where tankers are being tied up for weeks while waiting to transfer oil outside the Strait of Hormuz. These operations have increased the time vessels spend on Middle Eastern shipping routes, reducing the number of very large crude carriers (VLCCs) available for other major trade flows, including shipments from the United States to Asia.
The resulting pressure has spread to smaller tankers, including Suezmax and Aframax vessels. As oil producers and buyers struggle to secure supertankers, demand for smaller ships has increased, pushing up their daily freight rates as well. The combined effect has turned an oil supply crisis into a wider shipping crunch, with freight costs adding millions of dollars to individual cargoes.
Russell Hardy, chief executive of Vitol, the world’s largest independent oil trader, described the shuttle-shipping operations around Hormuz as “very inefficient” at the Energy Intelligence Forum in London this week.
“We started this conflict with a crude crisis. Then it turned into a product crisis. Now we have more crude oil coming out of the Middle East, but it is turning into a shipping crisis,” Hardy said. “There is really not quite enough shipping to go around.”
The pressure is also evident on routes from the United States to Asia. One supertanker was reportedly offered for a voyage from the US Gulf Coast to Japan at a total fee of $82 million, 50% higher than just three weeks earlier, Bloomberg reported.
Commodity trading giant Trafigura has also reportedly chartered a supertanker to transport crude from the US Gulf Coast to China for $76 million, according to a source familiar with the arrangement cited by CNBC. The fee compares with typical pre-war costs of $7 million to $10 million for the journey, representing an increase of roughly tenfold.
The $76 million charge translates into a freight cost of about $38 per barrel of oil, illustrating the scale of the additional expense facing traders moving crude across long distances. Such costs are increasing the financial pressure on oil transactions as buyers and sellers contend with sharply higher transportation charges.
Despite the shipping constraints, Middle Eastern crude exports have continued to recover. Shipbroker Fearnleys said in its weekly report on Wednesday that regional crude exports from the Middle East had exceeded pre-war levels on several days in late September.
“The VLCCs smaller sisters, Suez- and Aframaxes, are showing no sign of slowing down either so there’s really nowhere to hide right now,” Fearnleys analysts said, referring to the rising rates across tanker categories.
Argus experts said on Thursday that the increase in transportation costs was placing growing pressure on oil-trading economics. “Freight premiums are adding tens of dollars per barrel to delivered crude costs, raising questions about demand destruction and the sustainability of current market pricing,” they said.
