Shipping costs for US crude oil to Asia rise to a record high of $44.8 million

Impacted by concerns over supply disruptions in the Middle East, the cost of transporting U.S. crude oil to Asia has surged to a historic high. According to data from the Baltic Exchange, as of Tuesday, chartering a Very Large Crude Carrier (VLCC) to ship 2 million barrels of U.S. Gulf Coast crude oil to Asia costs about $44.8 million, setting a new record and up from $39 million the previous day. Before the outbreak of the Iran war, the cost for this route was around $17.8 million. With the situation in the Middle East disrupting energy supplies, U.S. crude oil has become an important source to fill supply gaps. Saudi Arabia previously shut the east-to-west pipeline connecting its eastern and western coasts, heightening market concerns over supply risks in the Strait of Hormuz. Despite the sharp increase in shipping rates, Asian buyers are still willing to bear the higher transportation costs, as U.S. WTI crude oil remains more price-competitive than other competing crudes upon arrival in Asia. Data from research firm Kpler shows that six VLCCs are already scheduled to load crude oil from the U.S. Gulf Coast to Asia in October.