Goldman Sachs sees crude freight rates surge to $20 per barrel
Global average crude freight rates have climbed above $20 per barrel from $3 per barrel a year ago, according to Goldman Sachs analysis released Wednesday. The increase initially started in the very large crude carrier segment and on Middle Eastern routes before spreading to all major crude trading routes, particularly affecting long-haul voyages. The bank ...
Goldman Sachs has reported that global crude freight rates have skyrocketed to $20 per barrel, up from just $3 per barrel a year prior. This significant jump began in the very large crude carrier segment and Middle Eastern routes before extending to all major crude trading routes, with a particular impact on long-haul voyages. The bank has identified five key factors contributing to this $20 per barrel surge in global average crude freight rates over the past year.
A war risk premium in the Hormuz strait accounts for $7 per barrel, making up one-third of the rate increase. Ship-to-ship transfers outside the Persian Gulf, which keep tankers on the water longer, add $4 per barrel to the rates. Higher maritime fuel prices add another $4 per barrel to the cost. Inefficient tanker allocation and increased tanker redirections factor in $3 per barrel, while the blockage of the Iranian fleet boosts demand for non-sanctioned crude tankers by $2 per barrel.
Although global freight rates have slightly decreased in recent days, possibly due to a reduction in the risk premium, the global average remains seven times higher than a year ago.
Goldman Sachs anticipates that these drivers will continue to support global freight rates as long as the conflict in the Middle East persists. The bank warns that high freight rates could lead to reduced refiners' demand for crude or a shift towards nearer crude suppliers. Since most traded crude benchmarks do not include transportation costs, Goldman Sachs believes that high freight rates will widen crude price differentials by altering crude trading patterns and supporting refined product prices while suppressing refiners' net margins.
Producers reliant on distant buyers may need to discount their crude more heavily to maintain demand from refiners facing high transportation costs, while refiners dependent on imported crude from distant suppliers may have to pass on high freight costs to final consumers or settle for lower net refinery margins.
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