US crude oil exports to Asia are set to hit multi-year lows after the Iran war disrupted global shipping and pushed the cost to lease a tanker for the Pacific journey to a record of almost $80 million.
Asian refinery orders for US crude for delivery in November tumbled roughly 50% to 24 million to 26 million barrels this month sequentially, according to traders who asked for anonymity because they weren’t authorized to publicly comment. If that pace of orders holds through the end of this month, it would mark a seven-year low, based on ship-tracking data from Kpler and Vortexa.
The tanker rate along the US Gulf Coast-to-China route has more than tripled since the US-Iran conflict erupted in late February to almost $60 million as of Thursday, according to Baltic Exchange figures. Earlier in the month, it touched $79.6 million, an unprecedented ruction in a market where rates averaged less than $8 million in the half decade before the conflict.
As it stands, leasing the largest class of crude carriers for the 30-day voyage is equivalent to half the cost of building a brand-new vessel. Those eye-watering rates doesn’t include the cost of the oil itself, which is trading around $100 a barrel.
“The main story right now in the market is freight rates,” Randy Hawkins, Valero Energy Inc.’s head of oil trading, said during as conference call with analysts.