Global oil, gas shipping costs surge as Iran vows to close Strait of Hormuz
Shipping through the Strait of Hormuz between Iran and Oman, which carries around one-fifth of oil consumed globally as well as large quantities of liquefied natural gas, has ground to a near halt after vessels in the area were hit as Iran retaliated to US and Israeli strikes
Highlights:
- Mideast-China VLCC rate exceeds $400,000/day
- Atlantic, Pacific LNG freight rates jump more than 40%
- South Korea maritime ministry tells shippers to refrain from operating in the Mideast
Global oil and gas shipping rates soared, with supertanker costs in the Middle East hitting all-time highs, as the US-Iran conflict intensified after Tehran targeted ships passing through the Strait of Hormuz, according to shipping data and industry sources on Tuesday.
Shipping through the Strait of Hormuz between Iran and Oman, which carries around one-fifth of oil consumed globally as well as large quantities of liquefied natural gas, has ground to a near halt after vessels in the area were hit as Iran retaliated to US and Israeli strikes.
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The disruption and fears of prolonged closure have caused oil and European natural gas prices to jump, with Brent crude futures up nearly 10% this week as the conflict triggered multiple oil and gas shutdowns in the Middle East.
The benchmark freight rate for the very large crude carriers (VLCCs) used to ship 2 million barrels of oil from the Middle East to China, also known as TD3, rose to an all-time high of W419 on the Worldscale industry measure used to calculate freight rates, on Monday, or $423,736 per day, LSEG data showed.
The rate doubled from Friday, extending gains from a six-year high last week, after the US and Israel attacked Iran and killed its Supreme Leader Ayatollah Khamenei on Saturday.
In retaliation, Iran has struck Gulf countries, prompting precautionary shutdowns at oil and gas facilities across the Middle East.
An Iranian Revolutionary Guards senior official said on Monday that the Strait of Hormuz is closed and Iran will fire on any ship trying to pass, Iranian media reported.
The US military's Central Command said the Strait is not closed despite the Iranian statements, Fox News reported.
LNG shipping rates jump
Still, daily freight rates for LNG tankers jumped more than 40% on Monday after Qatar halted its production.
Atlantic rates rose to $61,500 per day on Monday, up 43%, or $18,750, from Friday, according to Spark Commodities, a pricing assessment agency for LNG shipping. Pacific rates rose to $41,000 per day, up 45%, or $12,750, from Friday.
Fraser Carson, principal analyst for global LNG at energy consultancy Wood Mackenzie, said spot daily LNG shipping rates could rise above $100,000 this week on tight supply.
"Vessel availability for the rest of March is considered weak as cargo operators try to work through the backlog created by weather disruptions during February," he said.
"There will be very strong competition for any available vessels," he added.
Until safe passage through the Strait of Hormuz can be assured, shipping will remain idle, Carson said.
An oil shipbroker who declined to be named due to company policy said it is very difficult to assess shipping rates in the Gulf as several shipowners have suspended operations indefinitely.
South Korean shipping firm Hyundai Glovis said on Tuesday it is preparing contingency plans including securing alternative routes and ports in response to the Middle East conflict.
South Korea's maritime ministry has issued a notice to South Korean shippers with vessels sailing in the Middle East, asking them to refrain from business operations in the region, an official told Reuters on Tuesday.
The ministry is holding a meeting to discuss further safety measures following Iran's threat to attack any ship passing through the Strait of Hormuz, the official added.
