Asian refiners use smaller tankers, buy delivered crude as freight rates soar
USO•Asian refiners are using smaller and long-term-chartered tankers and buying Middle East crude on a delivered basis as shipping costs hover near records. About 80 VLCCs were tied up in Strait of Hormuz shuttle service, while shipping US crude to Asia cost $40 a barrel.
1. Freight reshapes crude sourcing
Asian and European refiners are shunning long-haul crude from the US and Africa as high freight costs widen discounts for those cargoes. About 80 very large crude carriers were tied up shuttling through the Strait of Hormuz, and the cost of shipping US crude to Asia reached $40 a barrel.
2. Smaller ships and delivered cargoes
Some Asian refiners are using Aframax tankers, which carry about 600,000 barrels, compared with about 2 million barrels aboard a VLCC. Taiwan refiner CPC bought six Aframax cargoes last week instead of its usual two to three monthly VLCCs, while ADNOC and Saudi Aramco sold delivered cargoes to Asian buyers, absorbing shipping costs. Formosa Petrochemical said net refining margins remained above $10 a barrel after freight and insurance costs for Middle East oil.
