Demand for tankers from Middle Eastern oil producers has driven prices to all-time highs, with new and second-hand very large crude carriers (VLCCs) now costing over $130 million in the second quarter. Chartering a supertanker for a year has also reached record levels, according to data from shipbroking company Braemar.
This surge is attributed to a shift by oil-producing countries towards using their own tanker fleets to transport oil, driven by increasing unease among major shipping companies regarding the frequent attacks on vessels in the Strait of Hormuz. This situation has led to some shipowners withdrawing from the region or demanding extraordinary rates to compensate for the significant risks.
For instance, Abu Dhabi's ADNOC recently purchased six supertankers and five very large gas carriers for a combined cost of $1.3 billion, with plans for immediate deployment. ADNOC, along with Kuwait Petroleum, has implemented shuttle arrangements to move crude to safer transfer points. Unlike the UAE, Iraq, which lacks its own tanker fleet, has been compelled to offer substantial discounts on its oil to incentivize buyers to undertake the risky passage through Hormuz. Saudi Aramco has also begun offering crude oil outside the Strait of Hormuz to some Asian refiners through ship-to-ship transfers off Fujairah and diverting some crude to the Red Sea port of Yanbu.
The crisis has created an expensive competition for vessels, crews, and insurance. Daily earnings for VLCCs operating on the most dangerous Gulf routes have reportedly reached as much as $550,000, compared to an average of nearly $470,000 during an earlier surge in June. This reflects not only a shortage of ships but also the need for owners to account for potential drone or missile attacks, vessel damage, navigation disruptions, and difficulties in obtaining insurance. The strategic implication is that Gulf states can no longer assume consistent availability of international shipping capacity, prompting them to invest in their own vessels, long-term charter agreements, and alternative export infrastructure like pipelines outside Hormuz, such as the UAE's pipeline connecting Abu Dhabi's oilfields with Fujairah.
