Crude tanker rates hit record highs on Middle East pressures

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Crude tanker freight has hit record highs on multiple routes ahead of the key winter demand season.

Is this a flash in the pan, or are further spikes in store? 

Freight for Very Large Crude Carrier routes from Brazil to Asia and from the US Gulf Coast to Asia surged in late September and early October due to tight supply. 

Since the war began, freight on the two routes has increased 274% from Brazil and 260% from the USGC.

So, what have been the main price drivers?

The two largest factors stem from the war in the Middle East: route disruptions and risk premiums.

Daily crossings at the Strait of Hormuz remain low, averaging just 21 in September, compared to 135 before the war. 

Shippers are also starting to avoid the Bab al-Mandab Strait because of Houthi attacks, slashing traffic through another key loading region.

Now, voyages have become longer, meaning the number of ships available at a given time has decreased. 

Additionally, insurance costs have risen due to the war risks, meaning every voyage chartered is more expensive – and those costs trickle down into crude prices.

Looking ahead, analysts expect the bull run to continue as winter demand approaches and tensions in the Middle East remain high.