Oil tankers earn US$1 million a day as Iran war leaves ship shortage

Oil tanker companies are now raking in profits of US$1 million per day, a record high, due to the ongoing conflicts in Iran and Ukraine. This surge in earnings is primarily driven by the shortage of oil tankers capable of navigating the Strait of Hormuz to collect cargoes. According to the Baltic Exchange in London, vessels hauling oil from the Persian Gulf to China are now being hired at US$1.035 million per day.

The primary reason behind this high demand for tankers is that the main method of exporting Persian Gulf oil has shifted, with ships now using the Gulf of Oman route, which avoids the hazardous strait. Despite this, the cost of transporting crude to China remains substantial, at approximately US$644,000 per day. In the past, when market conditions were poor, these same ships often struggled to cover their operational costs.

The recent spike in shipping costs can be attributed to various factors, including the Iran war and the strategic investments made by a secretive Korean tycoon. Additionally, oil refining margins have skyrocketed because the world is not producing enough fuel to meet the growing demand, primarily due to the ongoing conflicts in Iran and Ukraine.

Refineries are purchasing and shipping oil barrels despite the high costs, as it is still profitable for them to process the oil into finished fuels such as diesel and petrol. Moreover, the number of vessels carrying cargoes out of the Hormuz has increased, which has extended the journey time for tankers, further intensifying the supply issues.

This situation has been compounded by ongoing disruptions to Saudi oil flows originating from the Houthi rebels in Yemen, forcing some ships to circumnavigate Africa, adding an extra 30 days to their voyage.