$44.8 million! The freight rate for US crude oil shipped to Asia has hit a record high.

The deteriorating situation in the Middle East is profoundly reshaping the global energy trade landscape. As supply disruptions caused by the war with Iran intensify, the strategic value of US crude oil to Asian buyers has risen sharply, and related freight rates have reached record highs.

As of Tuesday, according to data from the Baltic Exchange, the cost of chartering a Very Large Crude Carrier (VLCC) to transport 2 million barrels of crude oil from the U.S. Gulf of Mexico to China has climbed to a record high of approximately $44.8 million, a significant jump from $39 million the previous day.

In comparison, before the outbreak of the war with Iran at the end of February this year, this cost was only about $17.8 million.

As previously reported by Wall Street News , last week the freight rate for Very Large Crude Carriers (VLCCs) from the Gulf of Oman to China surged to around 450 of the international benchmark rate (Worldscale), which is 4.5 times the normal benchmark rate, equivalent to about $11.50 per barrel, setting a new record high since the route was launched.

This week, Saudi Arabia announced the closure of its east-west oil pipeline, a key route for the country to bypass the Strait of Hormuz and circumvent the effects of war. This move has further exacerbated market concerns about supply disruptions and made the alternative role of US crude oil even more crucial.

Despite record-high shipping costs, Asian buyers' purchasing intentions have not been significantly dampened.

Price advantage supports the logic of high shipping costs in transactions.

High freight costs have not shaken the economic viability of this trade route, mainly because the price advantage of US crude oil remains significant.

Using WTI crude oil as a benchmark, the overall landed cost in Asia remains lower than that of competing sources such as Murban crude oil from the UAE. This price difference provides Asian buyers with sufficient buffer to absorb the high freight costs.

Analysts believe that as long as this relative price advantage persists, buyers will continue to bear higher-than-normal shipping costs.

It is worth noting that WTI crude oil rose by more than 4% in a single day due to strong demand, reaching a new high since April.

The price difference with Brent crude oil has also narrowed to less than $3.

Tight global tanker capacity exacerbates rate pressures

The record-high freight rates are not an isolated phenomenon, but rather a microcosm of the overall tightening of the global tanker market.

The risk of attacks on key shipping routes such as the Strait of Hormuz has increased, leading to a significant decrease in the number of ships willing to call at these routes, and a corresponding reduction in available shipping capacity.

Data from ship tracking agency Kpler shows that six VLCCs were scheduled to load crude oil from the U.S. Gulf Coast and sail to Asia in October.

From a broader perspective, the current situation marks a significant shift in the global crude oil supply landscape.

Following the outbreak of the Iran-Iraq War, the Strait of Hormuz, one of the world's most important crude oil export routes, faced a sharp increase in navigation risks, severely restricting the export of crude oil from the Middle East.

Saudi Arabia's closure of the East-West pipeline disrupted this alternative export route, exacerbating the already tight supply situation. This has made US crude oil a crucial source for Asian buyers to fill the gap and ensure energy security, and has driven profound structural adjustments in global energy trade flows.

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