Energy

Record $80,000,000 Shipping Bills Are Pricing American Oil Out Of Asia

Oil tanker, photo not from story (Jujovar2010 via Wikimedia Commons)

Record tanker rates have made American crude too expensive for Asian refiners, who are turning to Middle Eastern and South American oil instead.

Chartering a supertanker to haul two million barrels of U.S. crude from the Gulf of Mexico to China in November cost $80 million in early October, Reuters reported, citing data from shipbroker Simpson, Spence Young.

That works out to about $40 a barrel in shipping costs, compared with $8.60 before the Iran war started in February, according to the outlet.

The freight bill has closed the window for profitably shipping U.S. crude to Asia, traders and shipbrokers who spoke on condition of anonymity told Reuters.

The American Petroleum Institute did not immediately provide a comment on the record to the Daily Caller News Foundation.

Japanese refiner Cosmo Oil provisionally booked a supertanker for $81 million for a U.S. cargo loading Nov. 19-21, while bids of $76 million to $77 million by South Korea’s SK Energy and trading house Trafigura fell through, according to the sources cited by Reuters.

Trafigura told the DCNF it would “decline to comment on specific chartering transactions.”

“Energy market stress is also visible in maritime freight,” Max Pyziur, director of research programs at the Energy Policy Research Foundation, said in a statement to the DCNF. “With damaged vessels, the impaired choke points of Hormuz and Bab el-Mandeb, alternative routes such as transit around the Cape of Good Hope are being used.”

“These routes now carry the freight and are adding time to expected deliveries of the whole slate of liquid hydrocarbons,” he added.

Supertanker rates on the U.S. Gulf-to-Asia route have jumped more than 300 percent since mid-August, June Goh, a senior analyst at Sparta Commodities, told Reuters. She blamed “hugely inefficient ship-to-ship (STS) activities” used to work around the Strait of Hormuz closure, along with more Atlantic Basin crude heading east, which leaves fewer tankers available.

Asian refiners are weighing Murban crude from the United Arab Emirates, which pushed its premium over Dubai benchmark prices above $11 a barrel Thursday, according to Reuters. Traders also named Argentina’s Medanito crude as an option.

U.S. crude exports climbed to record highs after the Strait of Hormuz closed, rising from 4 million barrels a day in February to an average of 5.2 million in May, Dallas Fed economists wrote Thursday.

Exports averaged about 4.8 million barrels a day in the week ending Oct. 2, according to Energy Information Administration data.

Hurricane Isaias, which is forecast to make landfall on the Gulf Coast late Friday, could slow shipments further.

“We can also expect some disruption to U.S. exports due to ships waiting out the hurricane before approaching Houston and other Gulf ports,” Ellen Wald, a senior fellow at the Atlantic Council’s Global Energy Center, said in a statement to the DCNF.

Some trading firms are switching to smaller tankers, Reuters reported. Trafigura chartered the Torm Hilde, which carries about 600,000 barrels, for $24 million to load U.S. oil for Japan on Nov. 1.