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“Massive disruptions” could be seen in the crude oil trade in the Middle East, particularly in the Strait of Hormuz, according to a new report from IHS Markit.
Spot rates in the Gulf have increased dramatically after the most recent attack on two tankers in the Gulf of Oman last week, according to IHS Markit. A VLCC—capable of carrying 2 million barrels of crude oil—now commands US$15,000 to move crude from the Middle East Gulf to China—a more than US$4,000 increase from just days before the attacks. The July contract rate is even higher at US$25,000 per day.
Higher insurance rates are partially to blame for the increased fees, as are higher bunker fuel prices in the Middle East region. What’s more, vessel availability near the Gulf is expected to fall over the next couple of weeks, HIS Markit said, as ship owners are likely to avoid the risker area that has seen more than one attack in recent weeks.
The reduced tanker traffic in the area as a result of increased costs and higher risk may further eat into Iran’s oil exports, which have been steadily dropping since the United States levied sanctions on Iran and most recently, since the United States failed to extend the waivers to some of Iran’s biggest buyers of its crude.
China, IHS Markit said last week, was Iran’s last hope, with the fate of Iran’s oil industry clearly in the Asian country’s hands. China’s crude oil imports from Iran dropped in May, while its state-owned refineries go offline for regularly scheduled maintenance.
Clarksons Platou Securities today reported that VLCC rates as of today averaged US$22,100 per day, Freight Waves said, adding that that was a 63% increase week on week.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.