Saudi Oil Flows Spark VLCC Capacity Crisis
Saudi Arabia's decision to divert its oil flows from the port of Yanbu has caused a shortage in very large crude carrier (VLCC) capacity, driving up shipping costs to record levels. According to Kpler, the daily rate for VLCCs has reached $1.27 million as of this Monday, with 20 tankers waiting in the Red Sea to resume operations at the port.
The increased demand for VLCCs is due to Saudi Arabia selling 60 million barrels of crude oil to be shipped from the Gulf of Oman after being transferred from smaller carriers. This has led to a tightening of the already tight VLCC market, causing freight rates to skyrocket. Analyst Panagiotis Krontiras estimates that exporting the same amount of oil that required 24 VLCCs in August now requires 40 due to ship-to-ship transfers.
Anoop Singh, head of global shipping research at Oil Brokerage, noted that the 2 million barrels per day (bpd) increase in Saudi flows will generate additional demand for 15 VLCCs for shuttle runs alone. The increased tanker availability has led to a surge in oil shipping costs, further straining an already tight market.