Shipping US crude to China just hit a record

The cost of shipping US crude to Asia has reached a record high, according to Bloomberg News. The price for a very large crude carrier (VLCC) to transport 2 million barrels of crude from the US Gulf Coast to China has climbed to $44.8 million, a significant increase from $39 million the previous day. This surge comes as the ongoing conflict in Iran disrupts traditional oil-supply routes, making US crude more crucial for Asian buyers.

The closure of Saudi Arabia's East-West pipeline, a key route for bypassing disruptions around the Strait of Hormuz, has intensified the pressure on global oil flows. This has heightened the importance of US crude for refineries seeking alternative supplies.

Despite the escalating shipping expenses, Asian buyers find US Gulf crude cost-effective due to its lower price compared to other grades like Murban from the United Arab Emirates. This price advantage allows buyers to bear the higher freight cost while maintaining economic viability.

The surge in tanker costs is part of a broader trend as the conflict reshapes global shipping routes. Fewer vessels are willing to navigate through regions where the risk of attack has increased, such as the Strait of Hormuz, leading to tighter availability of tankers.

Refiners remain competitive in securing crude oil, as processing it into products like diesel and gasoline remains profitable. This incentive has led to continued demand for US crude, even as transportation costs rise.

Shipping data indicates that six VLCCs are scheduled to load crude from the US Gulf Coast for Asian destinations in October, as reported by Kpler. This growing number of US-to-Asia cargoes demonstrates how the Middle East conflict is altering global oil trade routes, with Asian buyers increasingly relying on American barrels to compensate for disrupted supplies.