Shipping a Barrel to Asia Now Costs $49

Shipping a Barrel to Asia Now Costs $49

In January it cost $3.24 to move a barrel of crude from the Gulf to East Asia. By late October it cost $49.42, fifteen times more in nine months.

Freight alone went from $3.18 to $37.13, and war risk insurance went from six cents to $12.29. Together they were 5% of the delivered cost of a barrel in January. They are now 30%. Close to a third of what an Asian buyer pays is simply the price of getting the oil to port.

That is separate from what crude itself is quoted at. War risk cover for tankers transiting the Strait of Hormuz has gone from roughly a tenth of a percent of hull value to between 6% and 10%, which can mean twenty million dollars for a single voyage. It produces an odd combination: futures prices fall while the cost of a delivered barrel in Asia does not.

This cost can reverse. War risk is repriced against current conditions rather than locked into long contracts, so premiums and freight will fall faster than crude once transit risk eases. Refiners are carrying a temporary cost, and shipowners are collecting a one off window rather than a new equilibrium.

These are weekly snapshots on one route, not an annual average, and rates vary widely by vessel and voyage. The line to watch is not the oil price. It is the premium.

Source: OPEC Monthly Oil Market Report with author calculations, and war risk quotes from reinsurance brokers (Image: @jackprandelli)