Oil tanker operators are experiencing record profits, with the cost of hiring vessels through the Strait of Hormuz and the broader Gulf region almost doubling this week. This surge is due to increasing demand as traffic picks up, with Middle Eastern crude producers accelerating their exports after months of delays. The number of ships transiting Hormuz remains a fraction of the pre-conflict daily average of 125, with as many as 100 tankers still held up inside the Gulf with cargo, contributing to a shortage of available vessels.
Rates for hiring a tanker outside the Strait of Hormuz have jumped to $190,500 per day from $106,500 a week ago. Average daily earnings for very large crude carriers (VLCCs) have reached a record of nearly $470,000 per day for cargoes within the Gulf requiring passage through Hormuz, an increase of over $50,000 from the previous week. This indicates an exceptionally tight tanker supply side, with a reopening of Hormuz expected to further strain capacity.
Key players in the industry, such as Frontline PLC, are benefiting significantly from these increased rates. Frontline, an international shipping company with a market capitalization of approximately $9.55 billion, operates a modern fleet of VLCCs and other tankers. The company generates most of its revenue from voyage and time charters, positioning it as a major beneficiary of the current market conditions. Despite the high rates, war risk insurance costs have softened over the past five days, dropping to around 3% of a ship's value from approximately 5% a week ago, excluding discounts, resulting in hundreds of thousands of dollars in savings for vessel owners.
Middle Easter producers, including the Abu Dhabi National Oil Company, have been actively offering crude in tenders, urging buyers to load from within the Gulf, which is driving this exacerbated demand for tankers. South Korean shipping group Sinokor, one of the largest supertanker operators globally, has seen its vessels, like the Belgium B supertanker, enter the Gulf to load cargo, heading towards Iraqi terminals. This increased activity by producers and operators underscores the heightened demand and the lucrative environment for tanker owners.
