Vitol Group CEO Russell Hardy says oil could spike to $200 a barrel if ship-to-ship transfers near the Strait of Hormuz are disrupted. Tanker earnings have topped $500,000 a day as the conflict has shifted from a crude shortage into a shipping squeeze.
Ship-to-ship transfers in the Gulf of Oman are the thin line standing between the oil market and a $200-a-barrel scenario, according to Russell Hardy, chief executive of Vitol Group, the world's biggest independent oil trader. Speaking at the Energy Intelligence Forum in London this week, Hardy said the transfers keep crude oil flowing out of the Middle East at a time when Western inventories offer no cushion.
Ship-to-ship transfers keep Gulf barrels moving
In the ship-to-ship process, smaller vessels pick up oil to transit the Strait of Hormuz, then reload the cargo onto larger tankers in the Gulf of Oman. Over the past 7-10 days, a total of 14 million barrels per day left the Middle East, including 2 million bpd of products and 12 million bpd of crude, Hardy told the forum. According to Hardy: "There aren't any more inventories to drain in the West."
Those flows remain well below pre-war levels, but Hardy said keeping them up is critical to avoiding another major spike in oil prices. Any deterioration in shipping conditions around the strait risks trapping higher volumes and leaving fewer barrels able to move through the chokepoint.
Tanker attacks have jumped in recent days
Attacks on tankers in the area have risen in recent days, threatening the lifeline Gulf exporters depend on. In the week to October 5, at least 12 attacks on oil, LNG, and LPG tankers took place around the Strait of Hormuz, Reuters reported, citing maritime security sources. The US Navy-led Joint Maritime Information Center said Iranian Revolutionary Guard Corps activity, including UAV overflight and surveillance of merchant shipping, persisted over the weekend.
A crude crisis turns into a shipping crisis
Hardy said shuttle-shipping through the strait is inefficient, because many tankers stay tied up in the area waiting for cargoes for days or weeks. That removes them from the broader fleet and cuts tanker availability on other routes, pushing freight rates to record highs. He said the conflict started as a crude crisis, then became a product crisis, and is now becoming a shipping crisis because there isn't quite enough shipping to go around.
Average global crude vessel earnings exceeded $500,000 per day in early October, 10 times the 2025 average, Rico Luman, senior sector economist for transport and logistics at ING, wrote in a note this week. Crude shipments from Saudi Arabia's Ras Tanura to Rotterdam cost about $2 a barrel last year, but surged beyond $35 a barrel in September, Luman said.
Luman said the record shipping costs, combined with European refinery margins 2.5 times above the 2025 average, could add more than $0.50 to the base price of a liter of diesel at the pump. He said the market has seen previous surges, such as after sanctions were placed on Russia in 2022, but this spike is beyond levels seen before.
Source: Investing.com
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