The bellwether Mideast Gulf to China VLCC rate has more than doubled since 27 February in $/t terms, from already near six-year highs, as severe escalations to the conflict in the Mideast Gulf halted the majority of trade through the strait of Hormuz.
The Argus-assessed crude-specific Basrah medium, Mideast Gulf to China VLCC rate surged to $15.32/bl on 3 March, just over 20pc of the fob price for the same grade.
This rate stood at $6.82/bl or around 10pc of the fob value on 27 February prior to the escalation, which was already a six-year high, about four times the rate at the same time last year.
Despite high earning potential, VLCC spot market discussions in the Mideast Gulf remained largely muted.
Market participants are mostly adopting a wait-and-see approach as a result of heightened risk in the strait of Hormuz — one of the world's most important energy corridors.
The threat level in the strait has been raised after attacks on commercial vessels over the past five days, while major protection and indemnity (P&I) clubs' re-insurers have cancelled their war risk coverage in certain areas of the Mideast Gulf and the Gulf of Oman, leading to a de-facto closure of the waterway.
Roaring freight costs, and heightened risk levels may push buyers to regions not directly affected by the conflict, such as west Africa.
Indian refiners are turning to Russian crude to help plug a shortfall in Mideast Gulf arrivals, trading sources said. At least 12mn bl of Mideast Gulf crude on tankers bound for India is idling west of the strait of Hormuz, data from trade analytics platform Vortexa show.
