Freight from Brazil to China reaches $36 per barrel — OilPrice
Record-high costs of sea oil transportation are forcing producers to offer discounts on crude or seek buyers closer to production sites. According to OilPrice, high freight rates are changing supply routes: India may increase purchases of oil from Brazil and West Africa, while Chinese refiners expect cheaper deliveries.
Deliveries to China are becoming more expensive
Rates for transporting oil on VLCC tankers from the Persian Gulf to China, according to the publication's estimates, rose from about $4 to $17 per barrel after the war began in March. After falling to $11–12 in April–July, freight rates rose again to $33 per barrel at the end of September. This pushed the current delivered cost of oil to China to about $140 per barrel, and to Japan and South Korea to about $145.
Transportation from the Saudi terminal of Yanbu to China reached $28 per barrel in mid-October. OilPrice links this to restrictions on Saudi cargoes passing through the Bab el-Mandeb Strait. Loading volumes in Yanbu, according to the cited estimates, fell to 1.6–1.8 million barrels per day, approximately half the average level in March–July.
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India is becoming a more advantageous destination
VLCC freight from Brazil to China reached about $36 per barrel in mid-October, pushing the delivered price of Brazilian Tupi crude to about $140 per barrel. Chinese buyers, OilPrice notes, are seeking supplies priced closer to $130 per barrel. As a result, offers of Brazilian oil to China have declined in recent weeks, while India has become a more attractive destination for sellers.
For West African oil, delivery to China costs about $34 per barrel, which is approximately $9 more expensive than a voyage to India. According to the publication's estimates, India's imports of oil from Angola may rise from 35,000 barrels per day in September to 315,000 barrels per day in October. Additional cargoes from Gabon and the Republic of the Congo are also heading to India's west coast.
Delays and insurance costs
Buyers' decisions are influenced not only by freight rates but also by delays and insurance costs. OilPrice writes that demurrage for cargoes shipped from the Persian Gulf has risen to $1 million per day, or about $0.50 per barrel for each day of delay for a fully loaded VLCC. War risk premiums, according to the publication, amount to 7–8% of the value of a tanker's hull and equipment, or about $4–5 per barrel for an average VLCC.
