$44.8 million per ship! Cost of shipping U.S. crude oil to Asia hits record high

As Middle East supply disruptions intensify and buyers rush to lock in energy cargoes, the cost of shipping U.S. crude oil to Asia has soared to a new record. According to Baltic Exchange data, as of Tuesday, the cost of chartering a Very Large Crude Carrier (VLCC) to transport 2 million barrels of crude oil from the U.S. Gulf Coast to China reached approximately $44.8 million, setting an all-time high and marking a sharp jump from $39 million the previous day. Before the Iran conflict broke out at the end of February, this cost was only about $17.8 million. With supply gaps emerging due to the conflict, U.S. crude continues to serve as a pillar of market supply. This week, Saudi Arabia shut down the East-West Pipeline the country's main conduit for bypassing the turmoil in the Strait of Hormuz caused by the Iran conflict. This situation has made U.S. supply even more critical, and record shipping costs have barely deterred Asian buyers, as the conflict is reshaping the global energy flow landscape. Nevertheless, this transoceanic trade remains viable because U.S. benchmark West Texas Intermediate (WTI) crude delivered to Asia is still cheaper than competing sources such as UAE's Murban crude. As long as this price advantage persists, buyers are likely to continue bearing above-normal shipping costs. The surge in Gulf Coast shipping costs comes amid rising global tanker freight rates, with little sign that this momentum will change. Many vessels are reluctant to traverse routes at risk of attack, and capacity supply through the key chokepoint of the Strait of Hormuz has contracted. Meanwhile, strong fuel demand means refiners will continue to buy and transport whatever crude they can obtain, as processing this oil into refined products such as diesel and gasoline remains profitable. Data from research firm Kpler already shows that six VLCCs are scheduled to load crude oil from the U.S. Gulf Coast for delivery to Asia in October.