Analysis: Tanker Rates Soar Amid Hormuz Closure


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- The outbreak of war between the U.S. and its allies and Iran 
has left hundreds of tankers stranded on both sides of the Strait of Hormuz, 
propelling some dirty tanker rates to the highest on record.

   With a sizable chunk of the global crude oil tanker fleet now idle, charter 
rates for mid-sized tankers carrying crude and fuel oil from the Middle East 
jumped to their highest in close to six years.

   In addition to the tanker supply shock, on-land inventories are quickly 
filling up amid the sudden loss of takeaway capacity, leading to a spike in 
demand for 2-million-barrel-capacity Very Large Crude Carriers (VLCCs) for 
offshore storage. Costs for dirty VLCCs from the Middle East to Asia have 
jumped to record highs, with some up 900% since the beginning of the year.

   Charter rates for refined product tankers have also surged from the closure 
of the world's most important oil transit point. Clean tanker costs from the 
Persian Gulf have doubled over the past two weeks alone.

   The ripple effects spread through the global tanker market and was also felt 
on U.S. shores. Rates for dirty tankers from the U.S. Gulf Coast to Europe are 
up 60% from the beginning of the year. As Asian refiners are scrambling to 
replace their main source of crude oil, shipping costs from PADD 3 to East Asia 
have jumped to the highest on record.

   Freight rates are unlikely to normalize any time soon as signs are pointing 
to a prolonged war growing in scope. Ten countries have so far suffered attacks 
since Saturday, and U.S. allies in the region who were targeted by Iranian 
drones and missiles are considering joining the U.S. and Israel in their war 
against Iran. U.S. President Donald Trump on Monday said he expected operations 
to last four to five weeks.




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