Tanker freight rates undermine the viability of U.S. crude in Asia
The cost of transporting oil from the United States to China reached about US$ 80 million, reducing the route's appeal and prompting Asian refineries to consider alternatives in the Middle East and Latin America.
Freight rates reshape the oil trade
Transporting oil from the United States to Asia has become significantly more expensive and is beginning to undermine the economic viability of this route. Chartering a vessel capable of carrying about 2 million barrels from the Gulf of Mexico to China in November reached approximately US$ 80 million, according to shipping-brokerage data cited by the sources consulted.
That amount is equivalent to about US$ 40 to US$ 41 per barrel transported, compared with an average of US$ 4.50 per barrel on the same route the previous year. With freight accounting for nearly half of the WTI oil price cited in the reports, the so-called arbitrage window for this flow ceased to be economically attractive to some Asian buyers.
The increase is associated with a global shortage of tankers. Transshipment operations near the Strait of Hormuz add time to voyages and reduce the fleet's effective availability. In addition, attacks that took vessels out of service for repairs and ship diversions around Africa increased the distance traveled and added pressure to the freight market.
The partial resumption of traffic through Hormuz also required the repositioning of vessels that had been moved to other regions during the decline in shipments. This process may take weeks, keeping the available supply of tonnage constrained.
Against this backdrop, Asian refineries began assessing alternatives to U.S. oil. Murban crude from the United Arab Emirates drew attention and traded at a premium of more than US$ 11 per barrel over Dubai quotations in one of the sessions cited. Argentina's Medanito crude is also among the options under consideration.
The shift, however, is not uniform. Some companies may still accept paying more for U.S. oil to preserve supply security. Meanwhile, U.S. sellers are likely to face pressure to lower their offers, and operators have begun considering smaller vessels for certain cargoes.
Higher freight rates also affect refinery margins. For processing to remain profitable, refining gains must offset the increase in delivery costs. If the escalation persists, refineries may reduce the volume of oil they process, altering international cargo flows and fuel availability.