Asia feels pinch from higher Middle East oil shipping costs

TOKYO/NEW DELHI: Asian oil refiners are being squeezed by rising freight rates and insurance costs for shipping crude from the Middle East after attacks on ships in the Gulf last month, industry officials and analysts said.
The Middle East accounts for more than two-thirds of Asia’s oil supply and the attacks on tankers in the Gulf of Oman on June 13 have heightened security concerns among oil companies and shippers operating in the region.
The war risk insurance premium (WRP) for ships travelling in the Gulf has risen 10-fold as a result, according to industry participants. Meanwhile, the freight rates for very large crude carriers (VLCC) from Gulf oil terminals to Asian ports have jumped about 30 per cent since the attacks, according to Refinitiv data.
“Earlier it (WRP) was virtually nil for a VLCC as we were paying about $15,000-$20,000 and now this has gone up to $150,000 to $200,000,” said an official at Indian Oil Corp (IOC).
The IOC official said its WRP has gone up to 0.4 per cent from 0.04 per cent while the Petroleum Association of Japan (PAJ) said late last month that the insurance rate had risen to 0.25 per cent from 0.025 per cent.
The WRP is set as a percentage of the ship’s value, said multiple trading sources, adding that the newer the ships are, the higher the insurance cost will be.
Since June 12, the cost of shipping crude from the Saudi Arabian port of Ras Tanura in the Gulf to Ningbo, China, on a VLCC has surged 27 per cent to $1.24 a barrel, Refinitiv data showed. In that same period and using the same type of vessel, moving crude from the United Arab Emirates to the Indian port of Visakhapatnam has climbed 37 per cent and from Kuwait to Singapore by 24 per cent, the data showed.
A trader at a Chinese refinery said the jump in freight rates were still manageable at this point. — Reuters