Supertanker freight rates have surged to unprecedented levels, with earnings for very large crude carriers (VLCCs) reaching nearly $1 million per day on the benchmark Middle East-to-China route. This dramatic increase is attributed to ongoing conflicts in the Persian Gulf, especially the Strait of Hormuz and the Bab el-Mandeb Strait, which are critical maritime chokepoints. The heightened risks and complexities of navigating these regions have significantly reduced the availability of vessels willing to undertake such voyages, leading to a severe shortage of tankers.
The squeeze on shipping costs extends beyond the immediate conflict zones. For instance, VLCCs traveling from Oman to China are commanding $571,000 per day, roughly 10 times last year's average, despite Oman's ports being outside Hormuz. Similarly, shipping crude from the US Gulf to Asia now adds about $18 per barrel, with some voyages costing $29.5 million lump sum, or approximately $15 per barrel before additional war risks. West Africa-China rates have also seen a sharp rise to $411,000 per day, up 280% in a month, as longer Atlantic-to-Asia voyages tie up ships.
The situation is exacerbated by recent drone strikes on Saudi Arabia's East-West pipeline, which have forced barrels that would have left from the Red Sea back into the Gulf, further intensifying demand for tankers in the high-risk Hormuz region. This pipeline outage, taking roughly 5 million barrels per day offline, has closed the last workaround for some oil exports, driving up freight rates. Ship owners are demanding a "fear premium" of around $430,000 per day for Hormuz transits, with Ras Tanura to Ningbo voyages returning $921,973 per day, compared to $459,723 per day for Fujairah to Ulsan.
While the current market conditions present a windfall for shipowners, with some advising to capitalize on these "exceptional earnings" that "may never happen again," they pose a significant cost shock for the wider energy market. Analysts at Kpler expect VLCC earnings to remain above $100,000 per day into early next year, and Morgan Stanley analysts predict two-year leasing rates could surge another 20% to 30%. The global VLCC fleet consists of 928 vessels, with an average age of 13 years, and despite a growing order book, the immediate demand and risk premiums are sustaining these record-high rates.
