Supertanker Shortage Drives Up Shipping Costs, Threatens Long-Haul Oil Flows

The soaring cost of shipping oil has made long-distance crude trades uneconomical, threatening to disrupt flows at a time when fuel markets are extremely tight.

A shortage of available supertankers is driving up costs. In some parts of the world, there are barely any ships left for hire, making faraway barrels less attractive and encouraging refiners to snap up supplies closer to home if they can find them.

Moving a cargo from Houston to Asia now adds about $26 a barrel, $52 million a cargo, to the cost of supplying the world’s largest crude-importing region. This is equal to roughly a quarter of the price of West Texas Intermediate futures, which typically accounted for only a tiny fraction of the cost.

The rally is minting fortunes for shipowners who dominate the tanker market, with the value of the world's largest oil tanker equities soaring to a record of almost $70 billion this week. However, for oil traders, the risk is that shipping is becoming prohibitively expensive, making it unprofitable for some refiners to turn crude into fuels and deterring them from buying cargoes that have to sail over long distances.