Increased demand for tankers to ferry oil to Asia from the Gulf Coast has seen shipping prices skyrocket.
Less than a month following the drone attack on Saudi facilities at Abqaiq and Khurais which halved oil output from the region, prices had begun to settle somewhat. However, increased shipping costs are keeping prices high.
The issue is in the US Gulf Coast where the cost of chartering a VLCC, or very large crude carrier, has almost doubled to $10 million ($5 a barrel) since the attacks. As a result, prices have also increased for US oil exports – just as Asian countries including Japan and India are looking to replace lost deliveries and bolster stockpiles.
And as demand increases, the number of ships available to make the voyage has struggled to match, made worse with a number of Chinese ships blacklisted for allegedly carrying Iranian crude as well as a number of in-harbour tankers currently being retrofitted to comply with upcoming emissions regulations.
Analyst at RBC Capital Markets, Michael Tran commented that: “Asia has been pulling barrels from everywhere. If it becomes uneconomical to ship U.S. barrels to Asia, that essentially leaves barrels stranded in the U.S.”
Despite rising shipping costs, it’s expected that countries will continue paying the added fees now rather than risk oil prices increasing once more.