Gulf oil tanker rates nearly double as Middle East producers ramp up exports

Oil tanker operators are capitalising on rising demand by nearly doubling hire costs for vessels in the Strait of Hormuz and Gulf region, amid a slow increase in traffic.

​Oil tanker operators are reaping record profits after nearly doubling the hire cost of vessels going through the Strait of Hormuz and wider Gulf region this week on rising demand as traffic through the waterway slowly picks up, according ‌to shipping data and sources. Traffic through the vital strait has been modest since Iran lifted its effective blockade last week after agreeing to a 60-day ceasefire with the U.S., as talks on a permanent deal to end their war continue. The number of ships going through Hormuz is a fraction of the daily average of 125 before ‌the conflict began on February 28. As many as 100 tankers remain stuck inside the Gulf with cargoes onboard, according to market estimates, adding to ‌a shortage of available vessels as Middle Eastern crude producers ramp up exports.

Rates for hiring a tanker outside the Strait of Hormuz have jumped to $190,500 a day from $106,500 a week ago, according to ship brokers and industry sources, with those hired outside the Gulf region also surging. Average daily earnings for very large crude carriers (VLCCs) have jumped to a record of nearly $470,000 a day for cargoes inside the ⁠Gulf that ​need to go through Hormuz, rising ⁠by over $50,000 from a week ago, according to estimates from the ship brokers and industry sources.

"Tanker owners are preparing for an influx of Middle East crude cargoes in the coming weeks and ⁠are emboldened by the fact that spot TCEs (earnings) averaged above $100,000/day despite the loss of ... cargo volume since the U.S.-Iran hostilities commenced," ship broker Clarksons said. "This indicates the (tanker) supply side remains exceptionally ​tight and a re-opening of Hormuz would tighten capacity further," it said in a note.

MIDDLE EAST PRODUCERS' FLURRY OF TENDERS Middle Eastern producers, particularly ⁠Abu Dhabi National Oil Company, have offered crude in a flurry of tenders this month and are urging buyers to load from inside the Gulf, spurring demand for tankers. South Korean shipping group Sinokor — one ⁠of ​the world's biggest operators of supertankers — did not respond to a request for comment. Its Belgium B supertanker entered the Gulf on Monday in the latest of the group's vessels looking to load and was sailing towards Iraqi terminals, ship tracking data on MarineTraffic showed on Tuesday. While tanker rates have risen, war risk ⁠insurance costs have softened in the past five days to around 3% of the value of a ship from around 5% over a week ago, excluding ⁠discounts, insurance industry sources said. This would ⁠mean a reduction in hundreds of thousands of dollars in insurance costs for ships.

Buyers in India, including its biggest refiner Reliance, have been seeking crude from the region following months of disruption in supplies. Reliance did not respond to ‌a Reuters request for comment.