Saudi Pipeline Restart Fails to Ease Oil Market Tightness
The restart of Saudi Aramco's East-West pipeline has not alleviated ongoing oil market tightness. Despite the resumption of flows at a low rate, freight costs for VLCC tankers have surged due to geopolitical risks in the Persian Gulf and limited vessel availability. Daily earnings on key routes like Gulf-to-China now exceed $1 million, with some charter rates reaching unprecedented levels such as TotalEnergies' recent $75 million deal. The rising cost of shipping is significantly impacting oil delivery economics, increasing freight's share from 5-6% to over 25% in the total crude import costs for Asian markets. This trend has prompted refiners like those in China and Brazil to shift toward smaller vessels such as Suezmaxes for long-distance shipments. Meanwhile, market developments include Trafigura launching its own shipping firm Volare with a fleet of VLCCs, TotalEnergies securing $1.8 billion from BlackRock's infrastructure fund, and ONGC announcing a new gas discovery in India’s Mahanadi Basin.
Topics: ADNOC oil freight costs shipping industry TotalEnergies Trafigura VLCC tankers