The cost of shipping US crude to Asia has surged to a record as buyers scramble for oil supplies amid growing disruptions to Middle East energy flows, Bloomberg News reported.
Hiring a very large crude carrier, or VLCC, to move 2 million barrels of crude from the US Gulf Coast to China cost about $44.8 million on Tuesday, according to Baltic Exchange data, as reported by Bloomberg News. That was up from about $39 million a day earlier and more than double the roughly $17.8 million cost before the outbreak of the war in Iran in late February.
Also Read: When it comes to crude oil prices, it's all about location, location, location
The surge in freight rates comes as the conflict continues to disrupt established oil-supply routes, increasing the importance of alternative sources such as the United States for Asian buyers.
Saudi Arabia this week closed its East-West pipeline, the main route that had allowed the kingdom to bypass disruptions caused by the turmoil around the Strait of Hormuz. The closure has added to pressure on global oil flows and made US crude even more important to refiners looking to secure alternative supplies.
For Asian buyers, however, the economics of bringing crude from the US Gulf remain favourable despite the soaring shipping bill.
West Texas Intermediate, the US benchmark crude, delivered to Asia is still cheaper than competing grades such as Murban from the United Arab Emirates. That price advantage means buyers can absorb much of the higher freight cost while keeping the trade economically viable.
The jump in US Gulf-to-Asia freight rates is part of a broader surge in tanker costs as the conflict reshapes global shipping routes. Fewer vessels are willing to sail through areas where the risk of attack has increased, including the Strait of Hormuz, tightening the availability of tankers.
Also Read: Oil tanker rates hit record highs following Iran, US shipping attacks
Strong fuel demand is adding to the pressure. Refiners continue to compete for available crude because processing the oil into products such as diesel and gasoline remains profitable, giving them an incentive to keep sourcing barrels even as transportation costs climb.
The changing trade flows are already showing up in shipping data. Six VLCCs are scheduled to load crude from the US Gulf Coast for Asia in October, according to research firm Kpler.
The growing number of US-to-Asia cargoes highlights how the Middle East conflict is redrawing global oil trade routes, with Asian buyers increasingly turning to American barrels to make up for supplies disrupted closer to home.
