Hormuz Congestion Drives Tanker Rates to Record Highs

Saudi Arabia's decision to divert crude exports through the Strait of Hormuz has put immense pressure on ship-to-ship transfer operations in the Gulf of Oman, pushing tanker rates to record highs. The surge in demand for supertankers is due to the September 13 attack on Saudi Arabia's East-West Pipeline, which halted crude exports from the Red Sea port of Yanbu.

According to Kpler data, Saudi crude exports through Hormuz are expected to rise to about 3.6 million barrels per day in September, a significant increase of almost 3 million bpd compared to August. This has created a substantial additional requirement for very large crude carriers (VLCCs), with each vessel capable of carrying approximately 2 million barrels of crude.

The pressure on shipping capacity is evident in the daily time-charter rate for a VLCC transporting Middle Eastern crude to China, which reached a record $1.27 million on Monday, according to LSEG data. Anoop Singh, head of global shipping research at commodity broker Oil Brokerage, noted that the number of additional VLCCs needed to move the same volume of oil had risen to 40 in September from 24 in August.

The congestion is not limited to Saudi Arabia's exports; other Gulf producers, such as Iraq and the United Arab Emirates, are also relying on ship-to-ship transfers outside Hormuz, adding to demand for tugboats, crews, and other services required to move crude between vessels. The strain on tankers and transfer infrastructure could intensify further if Yanbu remains unavailable for an extended period.