Asian refiners are feeling the pinch as tanker freight rates have surged to record levels, making U.S. Gulf‑of‑Mexico crude effectively out of reach. Shipbrokers Simpson, Spence & Young reported that chartering a very large crude carrier (VLCC) to move 2 million barrels of U.S. oil to China in November cost $80 million this week.
At that price, the shipping expense alone represents nearly half of the current West Texas Intermediate (WTI) futures price, dramatically eroding the profit margin for refiners in the world’s top oil‑importing region. The steep freight costs have closed the traditional arbitrage window that once allowed Asian buyers to source cheap U.S. crude.
Refiners look elsewhere
With U.S. oil becoming uneconomical to ship, traders say Asian processors are turning to alternatives from the Middle East and Latin America. Murban crude from the United Arab Emirates has seen its premium over Dubai quotes rebound to more than $11 per barrel, while an analyst noted Murban is roughly $2 per barrel cheaper than WTI on a delivered‑to‑Asia basis.
Japanese refiner Cosmo Oil has already provisionally chartered a VLCC for $81 million to load U.S. oil in late November, but South Korean refiner SK Energy and trading house Trafigura failed to secure similar deals at $76‑$77 million, according to anonymous sources.
Smaller tankers also feel the strain
Even Aframax vessels, which carry about 600,000 barrels, are seeing inflated rates. Trafigura booked an Aframax tanker for $24 million to ship U.S. oil to Japan, while a similar Vitol fixture for South Korea at $27 million did not materialize.
Analysts attribute the price spike to several factors: inefficient ship‑to‑ship transfers used to bypass the Strait of Hormuz closure, increased Atlantic‑Basin crude flows to the Far East, and a tighter supply of available tonnage. Sparta Commodities senior analyst June Goh said VLCC freight rates on the U.S. Gulf‑to‑Asia route have risen more than 300 percent since mid‑August.
Implications for the market
Higher freight costs mean Asian refiners must either absorb the expense or pass it on to consumers, potentially raising gasoline and diesel prices in the region. Some traders suggest the diversification of supply sources will continue, especially if the Strait of Hormuz remains vulnerable to disruption.
Despite the challenges, a shipping analyst noted that steady demand for tankers on this route and expectations of further U.S. strategic petroleum reserve releases are keeping freight rates elevated. As long as the arbitrage window stays closed, Asian buyers are likely to maintain a broader mix of crude sources to safeguard supply security.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
