Middle East Export Surge Sends Oil Tanker Rates Soaring

Oil tanker rates have nearly doubled in recent days as Middle Eastern producers increase exports. Ship brokers and industry sources report that hire costs for tankers traveling through the Strait of Hormuz and wider Gulf region have surged to $190,500 a day from $106,500 just a week ago.

The number of ships going through the vital strait remains low, with only 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, exacerbating a shortage of available vessels.

Middle Eastern crude producers, particularly Abu Dhabi National Oil Company, have issued a flurry of tenders this month and are urging buyers to load from inside the Gulf, driving up demand for tankers. War risk insurance costs have softened in recent days, decreasing by around 2% to 3% of the value of a ship.

Very large crude carriers (VLCCs) are seeing average daily earnings jump to nearly $470,000 a day for cargoes inside the Gulf that need to go through Hormuz. Tanker owners are preparing for an influx of Middle East crude cargoes in the coming weeks and are emboldened by spot TCEs averaging above $100,000/day.