Tanker rates jump as Middle East exports rise, war risk grows

The cost of shipping oil has surged to the highest in six years, fuelled by a wave of crude exports from the Middle East as traders accelerate charters ahead of possible military conflict between the US and Iran, industry sources said.

The cost of hiring a very large crude carrier (VLCC) to carry up to two million barrels from the Middle East to China has more than tripled from the start of the year to over $170,000 a day on Tuesday, the highest since April 2020, LSEG data showed.

Middle East crude exports in February exceeded 19 million barrels per day, the highest since April 2020, data from shipping analytics firm Kpler showed. This trend was led by Saudi Arabia, the United Arab Emirates and Iran and as India's demand rose after it cut Russian imports.

"VLCC freight rates have seen many positive fundamental drivers, starting with Venezuela barrels moving on legitimate freight vs a dark fleet before, increased OPEC+ production and healthy crude demand from refineries, particularly from India, which has moved from Russian to Middle Eastern barrels," said June Goh, a senior analyst at Sparta Commodities.

"Suezmax and Aframax markets will soon receive the spillover effects in the dirty freight market," she said, referring to crude and fuel oil transported in smaller tankers than VLCCs.