India's Reliance books supertanker at record freight price to lift Iraqi crude

Reliance Industries, India's largest refining company, recently paid a record $23 million to $25 million to charter a supertanker for transporting Iraqi crude oil. This high cost reflects the scarcity of ships in the Gulf region and the escalating expenses associated with each voyage. The Strait of Hormuz, the primary route for Iraq's seaborne oil, is experiencing a significant drop in shipping traffic, with only a fraction of the usual 125 to 140 vessels navigating through per day since the Iran war started in late February, 2021.

Reliance, operating the world's biggest refinery complex in Gujarat, India, secured the charter to load 2 million barrels of oil at 1200 World Scale, a freight cost indicator 12 times higher than the market benchmark. This resulted in a total charter cost of $23 million to $25 million, among the highest paid during the conflict, according to ship brokers. Prior to the war, freight rates were only 0.8 to 0.9 times the benchmark, equating to approximately $2 million.

Despite the record freight rate, Reliance anticipates substantial savings on the cargo due to the discounts provided by Iraq's state oil marketer, SOMO. The vessel for this charter will be provided by South Korea's Sinokor, one of the few shipowners still venturing through the Strait of Hormuz despite the increased risks of attacks on commercial vessels.

Iraq is offering its crude at a discount of around $25 to $30 per barrel to Dubai benchmarks to attract buyers for lifting cargoes from terminals within the Strait of Hormuz. Several Indian and Chinese refiners have approached shipping companies this week to secure vessels for loading crude at Iraq's Basrah Oil Terminal. However, no vessels have been booked yet due to shipowners' wariness of venturing into the hazardous waterway.