Crude oil prices are approaching $77 per barrel.
Spot rates for the largest crude oil tankers from the Persian Gulf to China have increased by 50% in the past week due to heightened Middle East tensions. Despite threats by Iran to close the crucial Strait of Hormuz, major container lines continue sailing through the region.
Rates for ultra-large crude carriers (VLCCs) on the Middle East Gulf to the Far East were already rising even before the United States bombed Iran’s nuclear facilities on June 21.
The rate for a 270,000-metric ton tanker surged by 22 points, approximately 50%, on the Worldscale (WS) global index, reaching around 75 points from a baseline of 100. This translates to a roundtrip time charter equivalent (TCE) of over $57,000 per day, as reported in published sources.
That rate was approximately $21,000 per day as of June 11.
Crude oil futures reached $76.42 on Sunday, up from the previous close of $73.84.
The Iranian parliament approved a measure on Sunday to close the Strait of Hormuz, the narrow waterway connecting the Gulf to the Arabian Sea and global shipping lanes. Approximately 17 million barrels per day, or one-fourth of the world’s production, pass through this waterway annually, according to the Strauss Center for International Security and Law at the University of Texas.
On Sunday, U.S. Secretary of State Marco Rubio urged China, the largest buyer of Iranian oil, to prevent Tehran from closing the strait.
A closure would require approval from Iran’s security regime, which last occurred in 1984.
Gulf nations, which collectively account for 2-3% of annual global container volumes, are closely monitoring the situation. Maersk, a Danish shipping line, issued an advisory stating that they are closely monitoring the situation, particularly considering the U.S. involvement in the conflict. While sailing through the Strait of Hormuz continues, Maersk is prepared to re-evaluate its strategy based on available information. Additionally, they are continuously monitoring the security risk to their vessels in the region and are ready to take necessary operational actions.
French-based CMA CGM also reported that shipping activities are proceeding normally in the area, and their operations and logistics chains remain unchanged. They emphasized their commitment to ensuring full service coverage across all routes and ports of call.
