Business

Tanker shortage disrupts long-haul crude

By Sohail Khan 19 September 2026, 6:21 pm

Benchmarks
Nifty23,346.4075.81

FEATURED FUNDS★★★★★

Motilal Oswal Midcap Fund Direct-Growth

5Y Return
22 %

Invest Now

Enter search text:

Business News›News›International›World News›World running short of supertankers threatens long-haul oil flow

Read Today's Paper

World running short of supertankers threatens long-haul oil flow
Synopsis

A shortage of supertankers, driven by the US-Iran conflict and a South Korean tycoon's big shipping bet, has pushed freight costs to record highs, adding about $26 a barrel (roughly a quarter of WTI's price) to Houston-to-Asia shipments.

3 oil supertankers appear to make move through Strait of Hormuz — Tanker shortage disrupts long-haul crude

The soaring cost of moving oil around the world is making some long-distance crude trades uneconomical, threatening to disrupt flows at a time when fuel markets have never been tighter.

The jump is being driven by a shortage of available supertankers. In some parts of the world, there are barely any of the ships — each the length of three football fields — left for hire. The squeeze is making faraway barrels less attractive and encouraging refiners to snap up supplies closer to home if they can find them.

Also read: Oil tankers earn $1 million a day as war leaves ship shortage

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. That’s equal to roughly a quarter of the price of West Texas Intermediate futures. Before the war, shipping typically accounted for only a tiny fraction of the cost.

Bloomberg

Freight adds about a quarter of the cost of oil

The rally is minting fortunes for the small group of shipowners that dominate the tanker market — several industry executives and brokers said the surge would previously have been unimaginable. The value of the world’s largest oil tanker equities soared to a record of almost $70 billion this week.

But for oil traders, the risk is that shipping becoming prohibitively expensive. They’re concerned that the higher costs make it unprofitable for some refiners to turn crude into fuels, deterring them from buying cargoes that have to sail over long distances, even when demand to make diesel and gasoline is strong.

On the industry’s main benchmark route, very large crude carriers hauling 2 million barrels of crude from the Persian Gulf to China are earning upward of $1.2 million a day. Similar pressures are now spreading across the freight market globally.

“It has never been this expensive to move oil around,” Saad Rahim, chief economist at trading giant Trafigura Group, said at the Bloomberg Commodity Investor Forum on Thursday. With freight becoming a larger portion of the value of the cargo, “it becomes a much bigger issue now when you start to think of that in terms of logistics.”

Some long-haul routes that became crucial after wars disrupted energy flows are now looking unattractive as a result of the surge.

Ship-tracking data from Vortexa show US-Asia flows have fallen in recent weeks, as freight costs roughly tripled. A Japanese refiner recently bought a cargo of Alaskan crude — a grade not typically well-suited for the country’s processors — because of the relatively short sailing distance, people familiar with the matter said.

In contrast, the clamor for nearby barrels shows up in Europe’s crude prices.

While Brent futures topped out close to $110 a barrel this week, the European Dated Brent physical crude price climbed above $131 as buyers hunted short-haul cargoes. The region’s processors are also scrambling to replace barrels from the Middle East after Saudi Arabia gave no cargoes to European buyers under their term contracts for next month.

Further afield, sales of Angolan oil, which usually sails thousands of miles to buyers in China, are sluggish.

“Current freight levels can become self-limiting over time — they eventually close arbitrage routes and reduce demand for the most expensive long-haul barrels,” said Sumit Ritolia, senior manager of modeling at analytics firm Kpler.

Shipbrokers with years of experience said they’ve never seen supertanker availability so tight, while multiple industry executives said they’ve never known a market like it. Many said there are few, if any, of the vessels available for hire in certain locations, depending on the timeframe in which they are required.

That’s rippling down to smaller ships.

Asian refiners are turning to 700,000-barrel Aframax tankers for some purchases from the US, rather than the supertankers typically used for those journeys. Shipments loading from ports in the Atlantic, including Brazil, are being booked on two 1 million-barrel Suezmax vessels rather one supertanker with twice that capacity, traders and shipbrokers said.

Also read: Replacing Russian crude near impossible for Indian refiners as US sanctions bill threatens 100% tariff, say executives

It’s dragged earnings for smaller vessels higher too. Earnings for Suezmaxes are on average north of $300,000 a day, rates typically associated with sailing in and out of war zones.

The biggest drivers of the surge are twofold: the knock-on effects of the US-Iran conflict, and a huge wager by a South Korean tycoon that was already sending shipping rates higher before the war began.

Vessels shuttling barrels through the Strait of Hormuz are sucking up more ships for longer as they switch cargoes near Oman. Other tankers are sailing thousands of miles around Africa to pick up cargoes in the Mediterranean, while until now, Asian buyers swapped lost Middle Eastern barrels for longer-haul supplies from the Americas. Those factors all help stretch out the tanker fleet and boost rates.

The key for oil traders is how long elevated freight rates can be sustained. Diesel futures in Europe are near $200 a barrel, a sign the region’s processors still need to get their hands on every cargo they can.

“Freight has never taken a big part of the delivered cost of oil, but it’s now playing a much bigger role in oil markets,” said Xavier Tang, senior market analyst at analytics firm Vortexa. “This is having a knock-on effect on end buyers.”

Add as a Reliable and Trusted News Source
Add Now!

(You can now subscribe to our WhatsApp channel)

(You can now subscribe to our WhatsApp channel)

Read More News on
vortexatrafigura groupeuropean dated brentsuezmaxesbloomberg commodity investor forumbloombergxavier tangsumit ritoliasaad rahimmiddle east

Enter search text:

Continue reading with one of these options:
Limited Access
Free
Login to get access to some exclusive stories

& personalised newsletters
Login Now

Unlimited Access
Starting @ Rs120/month
Get access to exclusive stories, expert opinions &

in-depth stock reports
Subscribe Now

Unlock Access to All Exclusives with ETPrime FREE TRIAL

15 Days Free: Unlock All ETPrime Exclusives, Market Tools & ePapers

Trial offer expiring in00 : 05 : 00

I'd rather pay ₹2599 now

Uh-oh! This is an exclusive story available for selected readers only.

Worry not. You’re just a step away.

Prime Account Detected!

It seems like you're already an ETPrime member with

Log out of your current logged-in account and log in again using your ET Prime credentials to enjoy all member benefits.

Unlock ETPrime's Exclusive Stories Today!

Subscribe to gain powerful insights on business, stock market and industry trends.

Big Price Drop! Flat 40% Off

Student Only Offer

Already a Member? Sign In now

Already a Member? Sign In now
Already a Member? Sign In now

Offer Exclusively For You

Save up to Rs. 700/-

ON ET PRIME MEMBERSHIP

Avail Offer

Offer Exclusively For You

Get 1 Year Free

With 1 and 2-Year ET prime membership

Avail Offer

Offer Exclusively For You

Get 1 Year Free

With 1 and 2-Year ET prime membership

Avail Offer

Offer Exclusively For You

Get Flat 40% Off

Then ₹ 1749 for 1 year

Avail Offer

Offer Exclusively For You

ET Prime at ₹ 49 for 1 month

Then ₹ 1749 for 1 year

Avail Offer

Special Offer

Get flat 40% off on ETPrime

Avail Offer
Avail Offer

Claim NowAlready a Member? Sign In now

Need Assistance?

Connect with an ETPrime expert for personalized support and guidance

+91 9484700004

' + h3 + '

' + h4 + '

' + listing + '

What’s Included with

ETPrime Membership

1Exclusive Insights That Matter

Uncover the truth with our investigative stories

Make strategic moves using the real-world case studies

Read industry-specific stories to identify emerging trends

Spot opportunities with in-depth insights that matter

Trump temper on H-1B visas is forcing Indians to do these things to stay put in US

What Adani’s US indictment means for India Inc’s overseas fundraising
Why veterans like Reliance, L&T are on acquisition spree? Aswath Damodaran has an answer.

Will China’s dollar bond sale in Saudi Arabia trump the US in financial world?
Huawei launches its own OS to compete with Google and Apple. But can it win beyond China?

The problem with lab grown diamonds
Why a falling rupee is a better option for the economy

A list of top 20 momentum stocks that have delivered massive returns in one year