Rates for very large crude carriers (VLCCs) transporting oil from the Middle East to China have risen to a three-month high of $66,600 per day as insurance costs spike amid the Houthi attacks on Red Sea vessels.
In the fourth-quarter of last year, rates for VLCCs, which carry around 2 million barrels of oil, were averaging around $21,000 per day, according to Freight Waves, citing data from Clarksons. In the third-quarter of last year, day rates averaged $8,700. For March, Bank of America says it expects VLCC day rates to maintain an average price of between $40,000 and $50,000, with prices dropping in Q2 to around $35,000-$40,000. The last time oil shipping costs spiked this high was in 2019, under pressure from Middle East geopolitics and U.S. sanctions on a Chinese tanker owner, pushing VLCC day rates from $25,000 to over $150,000 for an extended period of six months, Freight Waves reported.
Since the first half of December, the number of crude oil tankers traversing the Red Sea has dropped by up to 60%.
While oil prices have so far refrained from responding significantly to attacks on vessels in the Red Sea by Yemen's Iran-backed Houthis, insurers have responded by raising day rates in the best-case scenario, or issuing exclusions from any war risk claims for ships willing to brave the maritime hotspot.
On Sunday, an attack on a UK-registered ship, the Rubymar, forced the crew to abandon the vessel, which is now at risk of sinking, according to the Houthis.
The Rubymar was on its way to Bulgaria from the United Arab Emirates when it came under attack.
Prime Minister Rishi Sunak's spokesman said: "Clearly we condemn any attacks by the Houthis against commercial civilian ships," a spokesperson for British Prime MInister Rishi Sunak said.
"HMS Diamond and HMS Richmond continue to patrol the Red Sea to help protect commercial shipping and, as the PM has said, we will not hesitate to act to protect freedom of navigation and lives at sea."
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com More