Oil Tanker Costs Just Doubled on Vital Middle East to Asia Route

(Bloomberg) --

The cost to transport oil from the Middle East to Northeast Asia has almost doubled since late last week after the disintegration of the OPEC+ alliance set the scene for a flood of crude exports.

Charter rates for supertankers carrying oil from the Persian Gulf to South Korea surged to 95 points, according to three shipbrokers and fixtures seen by Bloomberg. The route is typically priced at a small premium of five points or less over the more widely-referenced Middle East to China rate, which averaged 49 points last week.

Routes between the Middle East and China, South Korea and Japan are among the busiest in the world as the big Asian importers rely on crude from Saudi Arabia, Kuwait and Iraq for their baseload oil feedstock. Tankers are booked at rates known as worldscale points, which is a percentage of an underlying flat rate for a specific route that’s fixed for the year.

Surging demand from Saudi Arabia, plus more interest in floating storage, has spurred a flurry of tanker inquiries, according to three shipbrokers. Bahri, the kingdom’s national shipping carrier, booked close to a dozen vessels this week, fixtures showed, following a pledge by OPEC’s top producer to swamp the market with a record 12.3 million barrels a day of oil next month.

VLCC Maran Arete was placed on provisional charter to load Middle Eastern crude toward the end of March for delivery to South Korea at 95 points, fixtures showed. That’s a jump from late last week when another VLCC FPMC C Noble was chartered for the same route at 45 points.

Rates on the Middle East to China route, also known as TD3C, may soon rise to 100 points, said two of the three shipbrokers, who asked not to be identified due to company policy.

To contact the reporters on this story: Sharon Cho in Singapore at ccho28@bloomberg.net;Serene Cheong in Singapore at scheong20@bloomberg.net;Elizabeth Low in Singapore at elow39@bloomberg.net

To contact the editors responsible for this story: Serene Cheong at scheong20@bloomberg.net, Andrew Janes, Ben Sharples

©2020 Bloomberg L.P.