Tanker freight rates have surged tenfold amid the Iran war, and Asian refiners have sharply cut orders of U.S. crude. The shipping squeeze is widening discounts on U.S. and African grades while lifting premiums on nearby supply.
Shipping U.S. Gulf Coast crude to China cost as much as $80 million earlier this month, ten times the average tanker rates that held for years before the Iran war. Rates have eased from early October's record highs, but a supertanker still cost about $60 million to carry oil from the U.S. to Asia this week.
Asian orders for U.S. barrels collapse
Because of those costs, Asian refiners are ordering little crude oil from the U.S. for November delivery. Anonymous traders told Bloomberg that orders plunged by about 50% from September, to about 25 million barrels. If orders stay that low through the monthly trading cycle, Asia could receive its lowest volumes of U.S. crude in seven years, according to vessel-tracking analysts.
Hormuz shuttle traffic ties up supertankers
The war has tied up tankers in long voyages. Ship-to-ship transfers in the Gulf of Oman are keeping supertankers waiting for weeks, which limits the supply of very large crude carriers for routes such as the U.S. Gulf Coast to Asia. According to Kpler, the Gulf of Oman shuttle fleet has expanded to about 80 VLCCs, with average round-voyage times of 23 days, against an optimal 9–10 days.
Valero Energy's Randy Hawkins said on the company's earnings call that the cost to move a VLCC from the Gulf Coast to Asia averages around 30 to $35 per barrel, compared with around $5 a barrel in 2025. He said the surge is causing "severe dislocations in our global crude pricing".
Premiums rise for nearby crude, discounts widen elsewhere
Refiners in Europe and Asia are shifting toward closer supply, which is pushing up premiums on some grades. The Dated Brent benchmark was at a record $20 per barrel premium to Brent last week.
Meanwhile, U.S. and African grades face the opposite pressure. The WTI premium at the Midland East Houston hub slumped to $0.25 a barrel above WTI, from over $3 in early September, per Link Data Services estimates cited by Bloomberg. Some West African grades have slumped to discounts as low as minus $20 per barrel to offset shipping costs.
Source: Oilprice.com
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