Oil tanker operators are seeing unprecedented profits as the cost of hiring vessels for Middle Eastern exports has nearly doubled this week. Rates for tankers outside the Strait of Hormuz have jumped to $190,500 per day from $106,500 just a week ago, while very large crude carriers (VLCCs) operating inside the Gulf have reached a record of almost $470,000 per day, a $50,000 increase from last week. This surge is driven by Middle Eastern crude producers, particularly Abu Dhabi National Oil Company, ramping up exports and urging buyers to load from within the Gulf, creating high demand for available tankers. Shipping data and industry sources confirm this dramatic increase in hire costs.
The number of ships transiting the Strait of Hormuz is picking up, with recent data showing the fastest flow of oil since the conflict began in late February. On Friday, Saturday, and Sunday, approximately 20 million barrels of crude were observed passing through the waterway. Despite the increased traffic, the overall number of ships moving through Hormuz remains a fraction of the daily average of 125 before the conflict. An estimated 100 tankers are still stuck inside the Gulf with loaded cargoes, contributing to a severe shortage of available vessels.
This tight supply side is emboldening tanker owners, who are preparing for a further influx of Middle East crude. Ship broker Clarksons noted that average spot earnings for tankers have remained above $100,000 per day even with reduced cargo volumes since U.S.-Iran hostilities began, indicating an exceptionally tight supply. The potential full reopening of Hormuz is expected to tighten capacity even further. South Korean shipping group Sinokor, a major supertanker operator, has had vessels, including its Belgium B supertanker, entering the Gulf to load from Iraqi terminals.
While tanker rates have soared, war risk insurance costs have actually softened in the past five days, falling to about 3% of a ship's value from approximately 5% a week ago, excluding discounts. This reduction in insurance expenses, potentially saving hundreds of thousands of dollars for ships, somewhat offsets the higher charter rates. Buyers in India, such as Reliance, are actively seeking crude from the region to address supply disruptions. The current market conditions present a favorable scenario for companies like Frontline PLC, a major oil tanker shipping firm, which stands to benefit from these elevated rates.
