Record crude oil tanker rates intensify competition for liquid bulk shipping capacity

Crude oil tanker freight rates have surged to record levels amid the war with Iran and risks to shipping in the Red Sea and the Strait of Hormuz. VLCC earnings on routes from the Persian Gulf to Asia have exceeded $1.2 mln per day, compared with an average of around $58 thsd per day last year.

The surge is already spreading to smaller vessels. Suezmax tankers capable of carrying around 1 mln barrels of crude oil are earning more than $300 thsd per day, while large cargoes are increasingly being split between several Suezmax or Aframax vessels.

High returns from crude oil shipping are changing tanker fleet deployment. Some clean tankers, which usually carry diesel, gasoline and other refined products, have started switching to crude oil because of higher profitability.

For vegetable oils and biofuels, this could mean stronger competition for available tanker capacity and higher logistics costs if more vessels move into crude oil transport. Liquid bulk cargoes relying on similar maritime logistics face the greatest exposure.

High freight rates are already increasing energy transport costs and making logistics a more important factor in sourcing decisions. Further developments will depend on the security of key shipping routes and the availability of tanker capacity.

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Tags: shipping, freight rates, Red Sea, oil tankers, Hormuz