03 Jul Rates Surge Amid Middle East Tension
The current volatility across the Middle East has seen spot rates for the largest crude oil tankers from the Persian Gulf to China surge 50%, whilst major shipping organisations continue to operate through the region for the moment.
The rate for a 270,000-metric tonne tanker rose approximately 50%, on the Worldscale (WS) global index to about 75, on a baseline of 100. This equates to a roundtrip time charter of more than $57,000 per day, up from $21,000 in early June. These rates may increase exponentially soon if Iran proceeds with their intention to close off the Straight of Hormuz, a waterway which sees 20% of the world’s oil production pass through every year.
In addition, ocean freight spot rates from Shanghai to the Arabian Gulf’s largest port, Jebel Ali, are surging, increasing 55% month over month. This rise is attributable to the elevated risks and associated operational costs, such as security measures and higher bunker fuel costs, for shipping organisations transiting through this region.
The impending waterway closure, in conjunction with the rising tensions has the potential to impact rates and the global supply chain, as shipping companies continually re-evaluate shipping routes through the region in order to be able to make any operational changes as needed, changes that will cause subsequent disruption in supply chain operations as well as further rate increases.
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