The average global freight rate to transport oil has surged to $20 per barrel from $3 per barrel last year as the Iran war and the Hormuz crisis have created a shipping crisis that’s unlikely to end soon, Goldman Sachs says.
Oil shipping rates are set to remain elevated in the near term amid no end in sight to the Middle East crisis, with the massive surge in freight costs posing an upside risk to Goldman’s current baseline oil price forecast of $90 per barrel Brent crude at the end of this year, the bank’s analysts said in a note.
“Higher freight rates for longer pose some upside risk to our Brent forecast, along with the risks of more intense shipping attacks, damage to oil infrastructure, and a stickier geopolitical risk premium,” Goldman’s commodity analysts wrote in the note, as carried by Bloomberg.
Average shipping costs have soared to above $20 per barrel, and rates on the Middle East routes have surged to $35 a barrel, the investment bank said.
The rise in the average freight costs includes an extra $7 a barrel war-risk premium in the Strait of Hormuz, $4 a barrel due to higher fuel costs, and $4 per barrel for the ship-to-ship (STS) transfers in the Gulf of Oman, which are tying up many tankers on this shuttle-shipping service, reducing vessel availability for other oil trade routes.
Supertanker rates topped $1.4 million per day on the Gulf to East Asia trip in early October – a record high, as the Iran war reshuffled trade routes and patterns and tied up more tankers in inefficient and lengthy voyages.
The inefficient oil loadings in the Middle East and the very tight supertanker market resulting from these have created a ripple effect extending to the market of smaller vessels, Aframax and Suezmax, whose demand and daily rates have also surged amid a shortage of supertankers.
