Supertankers returning to the Gulf outnumber cargoes, pulling rates off records

In the supertanker market (VLCC — a crude carrier holding about 2 million barrels), Breakwave's 6 November note says global cargo counts fell 10% in a week while the number of VLCCs in ballast, sailing empty, rose 13%. Of 145 ships ballasting back from the Far East, 51 were bound for the Gulf. In the Baltic Exchange's 30 October assessment, daily earnings on the Gulf–China route stood at 1.35 million dollars on a standard round-voyage basis.

Kpler analyst Matthew Wright attributed the fall in Worldscale, the index that expresses tanker freight by route, to softer demand on the Gulf of Oman route after new attacks on 4 November. Michael Ryan of Sparta Commodities said a possible US move to lift sanctions on some shadow fleet tankers would increase the number of ships available to carry cargo. According to Breakwave, eastbound exits by non-Iranian-linked ships fell from 67 to 43, while westbound entries rose from 57 to 73. Since the war began, 15 VLCCs have switched from Iranian, Russian or Venezuelan trade to compliant Gulf voyages.

The constraint is not the number of ships but the number of owners willing to offer them. Brokers told the Financial Times that in early October the additional war premium for a tanker entering the Gulf was 6–10% of hull value, up to 20 million dollars for a single supertanker voyage; the pre-war rate was about 0.25%. Breakwave calculates that the withdrawal of 10 of the 87 ballasters would wipe out the entire surplus. Falling rates do not mean the premium has dropped; they show that more tonnage is willing to risk entering the Gulf.

The effect of expensive freight reaches beyond the Gulf. Reuters reported on 6 November that crude freight from the US Gulf Coast to Asia had risen to 30–35 dollars a barrel, against about 5 dollars a year earlier. According to Delia He of Arrow Shipping, every additional dollar of freight has widened diesel margins by at least 8 dollars.