Saudi Oil Diversions Drive Record VLCC Charter Rates

Ship-to-ship oil transfers in the Gulf of Oman have reached capacity following a surge in Saudi Arabian exports diverted from the Red Sea. This shift began after a September 13 attack on the East-West Pipeline halted exports from the port of Yanbu, forcing Saudi Aramco to route more crude through the Strait of Hormuz.

The increased volume, combined with rising exports from Iraq and the United Arab Emirates, has created severe congestion. Queues for tugboats and labor have extended ship-to-ship operation times from seven days to ten. This bottleneck has driven daily time charter rates for very large crude carriers to a record $1.27 million.

In response to the delays, Chinese buyers are seeking alternative transfer locations off the coasts of India and Malaysia or requesting direct delivery to refineries. South Korean refiner S-Oil has already begun redirecting vessels to conduct transfers off the coast of India to avoid the congestion.