Record-breaking tanker rates are rendering long-distance crude trades uneconomical, forcing a shift toward regional supply chains as freight costs now account for a quarter of WTI futures prices.
European Dated Brent physical crude climbed above $131 while Brent futures topped close to $110 as buyers hunted short-haul cargoes amid Saudi supply cuts.
European diesel futures are near $200 a barrel, signaling strong demand for refined products despite soaring freight costs.
Freight costs from Houston to Asia now add about $26 a barrel, equal to a quarter of WTI futures price, making long-haul US crude exports uneconomical and reducing demand.
Sales of Angolan oil to China are sluggish because high freight costs make the long-haul route unattractive.
A Japanese refiner bought Alaskan crude due to its relatively short sailing distance, indicating localized demand despite the grade not being well-suited.
A severe shortage of supertankers has sent global freight costs to record highs, adding $26 per barrel to long-haul shipments from the US to Asia. This surge is forcing refiners to abandon distant supply routes in favor of local alternatives, creating a bifurcated market where short-haul crude commands a significant premium over global benchmarks.
The surge is driven by a critical shortage of available supertankers, exacerbated by geopolitical tensions in the Middle East and increased vessel demand for longer-haul routes around Africa.
Refiners are prioritizing short-haul crude purchases to avoid high freight costs, leading to localized price premiums in regions like Europe and causing a decline in long-haul trade volumes.