Supertanker Shortage Threatens Long-Haul Oil Flows As Shipping Costs Surge

The soaring cost of transporting oil around the world is making some long-distance crude trades uneconomical, threatening to disrupt flows at a time when fuel markets are exceptionally tight, according to Bloomberg News.

The supertanker squeeze is making distant crude less attractive and encouraging refiners to seek supplies closer to home when available.

The increase is being driven by a shortage of available supertankers. In some parts of the world, few vessels are available for hire. The squeeze is making distant crude less attractive and encouraging refiners to seek supplies closer to home when available.

Moving a cargo from Houston to Asia now adds about $26 a barrel, or roughly $52 million for a 2-million-barrel cargo, to the cost of supplying Asia, the world's largest crude-importing region.

That is roughly a quarter of the price of West Texas Intermediate futures. Before the war, shipping typically accounted for only a small portion of the delivered cost.

The surge is benefiting the relatively small group of shipowners that dominate the tanker market.

The value of major oil-tanker equities rose to a record of nearly $70 billion during the week, according to Bloomberg. For oil traders and refiners, however, increasingly expensive shipping creates a risk that some long-distance crude trades will no longer be profitable.

Higher freight costs could discourage refiners from buying cargoes that have to travel long distances, even when demand for diesel and gasoline remains strong.

On the industry's main benchmark route, very large crude carriers carrying about 2 million barrels from the Persian Gulf to China were earning more than $1.2 million a day. Similar pressure has spread to tanker markets globally.