Shortage of vessels puts further pressure on the oil trade
The world is beginning to face a shortage of available oil tankers, which is driving up freight costs and threatens to disrupt global oil flows even further.
There is oil in the world, but the cost of transporting it is skyrocketing due to a shortage of oil tankers.
In some areas, there are few or no such huge vessels left to charter, and on the US–Asia route, freight costs have roughly tripled in recent weeks. The Houston (Texas)–Asia route now costs around an extra $26 per barrel, equivalent to $52 million per shipment. Some long-haul oil shipments are now so expensive that they are becoming unprofitable, and buyers are seeking closer-to-home supplies.
“It’s never been this expensive”
The price of Brent crude is currently hovering around $100 a barrel. Sales of Angolan oil, which is usually transported thousands of miles to China, are sluggish.
“It has never been this expensive to transport oil,” said Saad Rahim, chief economist at trading giant Trafigura, at the Bloomberg Commodity Investor Forum. When transport costs account for a larger proportion of the cargo’s value, logistics become a much bigger issue, he said.
The oil tanker market is also experiencing an exceptional boom, which benefits the few shipowners who dominate the market.
One of them is now the South Korean billionaire Chung Ga-Hyun. In December, he began buying up a large number of giant oil tankers. The exceptional timing of this move has raised eyebrows in the industry. According to The Wall Street Journal this summer, his company, Sinokor, was estimated to own one in ten – a total of 80 – of the world’s very large crude carriers (VLCCs).
The Iran conflict is the cause
The main reason behind the shipping shortage is the conflict between the US and Iran, which is tying up vessels further out in the Strait of Hormuz. At the same time, the conflict in Yemen is causing more and more vessels to avoid the Red Sea and instead be forced to take the long detour around Africa.
Meanwhile, Asian buyers are replacing lost supplies from the Middle East with oil from America, which ties up even more vessels.
