The cost of shipping oil has skyrocketed sevenfold over the past year, reaching over $20 a barrel, due to the ongoing war in the Middle East. Goldman Sachs Group Inc. analysts, including Yulia Zhestkova Grigsby, attributed this surge to a combination of factors, including a $7 war-risk premium in the Strait of Hormuz, $4 for higher fuel costs, and $4 for the impact of ship-to-ship transfers.
The conflict between the US and Iran has disrupted global shipping routes, leading to attacks on vessels in and around the Persian Gulf. While initial shipping volumes through the Strait of Hormuz collapsed, they have since recovered, with vessels now shuttling cargoes for transfer onto larger tankers.
Analysts warn that elevated freight rates could reshape crude trade patterns. Refiners may reduce their demand for crude as the effective price of delivered oil rises, potentially altering established trading routes. Nearly a sixth of the tankers in the Persian Gulf and Gulf of Oman are currently tied up in ship-to-ship transfers daily.
Despite the surge in shipping costs, Goldman Sachs maintains a baseline forecast for Brent crude to drop to $90 a barrel by year-end. However, they caution that higher freight rates, along with risks of more intense shipping attacks and damage to oil infrastructure, pose upside risks to their forecast.