26/03/06
Strait of Hormuz squeeze lifts US crude, freight
Houston, 6 March (Argus) — North America's crude shipments are shifting towards
the Asia-Pacific to compensate for the loss of supply from the de facto closure
of the strait of Hormuz, and markets are showing the strain in the form of
record-high prices and surging freight rates. The shock wave from the Middle
East disruption has reached crude export terminals from Texas to Alaska,
prompting buyers to seek replacement barrels and tightening supply. On the US
Gulf coast, deepwater Mars crude surged to a six-year high premium to WTI CMA
Nymex as overseas refiners scrambled to replace Middle Eastern cargoes now cut
off by the effective shutdown of the Hormuz chokepoint, which carried around
277,000 b/d of mostly medium sour Mideast Gulf crude to the US Gulf coast from
November 2025 to February 2026, according to analytics platform Vortexa. US
light sweet WTI has emerged as a potential substitute for Abu Dhabi's light sour
Murban at Asia Pacific refineries. A Japanese refiner recently purchased 2mn bl
of WTI for June arrival in a deal concluded after the US-Iran conflict
escalated. US west coast delivered prices for medium sour Alaska North Slope
(ANS) crude also hit record highs this week as Asia-Pacific buying tightened
supply on the US west coast. Asia-Pacific refiners are seeking alternatives to
Middle Eastern grades as the closure of Hormuz effectively halts flows from the
region. ANS is one of the more readily available medium sour spot grades in the
Pacific basin, and this additional demand is further constraining west coast
availability. Elevated freight costs are also supporting west coast delivered
prices. A fleet of US flag tankers typically moves ANS to California and
Washington under Jones Act requirements and post Exxon Valdez oil spill
regulations. Some of these vessels may now be employed on trans-Pacific voyages
because of limited Suezmax availability in the region, tightening local tanker
supply and pushing freight costs higher. But soaring freight rates may curb the
appeal of US crude. VLCC rates for US Gulf coast loadings to China climbed to
about $14/bl on a WTI basis — nearly double week on week — reaching the highest
level since Argus began assessing the route in 2012. By John Cordner Send
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