A surge in crude shipments from the Red Sea port of Yanbu, bypassing the blockaded strait of Hormuz, has failed to stop a retreat in crude shipping rates, which are reeling from the loss of loadings out of the Mideast Gulf.
Yanbu crude loadings rose to 4-4.2mn b/d in April, compared with 800,000 b/d prior to the start of the US-Israel war with Iran on 28 February, according to data from Vortexa and Kpler. Meanwhile, Mideast Gulf loadings fell to 1.8-1.9mn b/d in April, compared with the roughly 16mn b/d being loaded prior to the war when vessels freely transited the strait of Hormuz.
Exporting from Yanbu, the terminus of the East-West pipeline across Saudi Arabia, is one of the few alternatives regional producers have of getting their crude to market after two months of stalled vessel traffic at the strait of Hormuz.
In April, traders sent nearly all of the additional Yanbu shipments to Asian buyers via very large crude carriers (VLCCs), with China, India and South Korea topping that list.
From a crude tanker demand-perspective, the increase in Yanbu loadings helps offset some of the drop in Mideast Gulf crude loadings, but the tanker market still faces a net loss in cargoes. This has caused the Yanbu-northeast Asia VLCC rate, which Argus launched on 4 March, to shrink to $4.79/bl, roughly a quarter of its 4 March level, tracking similar VLCC declines in the Atlantic basin in that time period.
The high risk of transiting the strait of Hormuz in the face of the Mideast Gulf war has kept supply extremely tight for the Mideast Gulf-China VLCC route, holding the rate on the route slightly below its all-time high of $17.23/bl, reached on 8 April. New bookings on the route have been minimal since the war started.
Looking ahead, these rate declines may extend. Shipyards are expected to deliver new tankers representing up to 6pc of the global tanker fleet this year. Adding this increased supply to a market potentially facing demand contraction means rates are likely to struggle to return near the all-time highs reached in early March.
