The Korean shipping company Sinokor is reported to have fixed with Cnooc the tanker Angola Prosperity, a VLCC of 299,940 dwt built in 2021, for a cargo in mid-August in the Middle East Gulf at a freight rate estimated at 510,604 dollars per day, just 16,400 dollars below the historical record of approximately 527,/day.
The most immediate consequence was the surge in the TD3C Middle East Gulf–China benchmark, which rose on August 6 by 43.3 Worldscale points to WS 475.6, equivalent to approximately 481,/day. The comparison with other routes is striking: approximately 107,/day for West Africa–China, 119,000 for US Gulf–China and 146,000 for Oman–China.
The central point is that there is no shortage of VLCCs in absolute terms. The global pool of ships in ballast is as high as approximately 486 VLCCs, equal to 53.4% of the fleet. But for immediate business in the Persian Gulf, the ships actually available would be only about 25, attributable to 12 operators. Age, position, insurance, charterer approval, crews and above all the owner’s willingness to take on the Hormuz risk drastically restrict the effective supply.
It is therefore risk, more than crude demand, that determines the price. Indeed, the fundamentals of Middle Eastern cargoes are weak: demand in tonne-mile terms in the Middle East Gulf remains depressed, and VLCC cargoes from Saudi Arabia, the Emirates, Iraq and Kuwait would have fallen by about 40% year on year. Part of the flows is also being diverted via the Cape of Good Hope, Yanbu and Sumed, while Asian buyers are increasing their procurement from the Atlantic.
The VLCC market therefore appears to have temporarily split in two. In the Atlantic, cargoes, tonne-miles and ship availability continue to matter most; in the Persian Gulf, what counts above all is who is willing and authorized to go there. The Angola Prosperity has thus set a new “reference price” for that type of risk.
The level of 510,/day does not, however, appear destined to become a new normal. If freight rates remain in the 400-500,000 dollar range long enough, the strong economic incentive should bring more ships back toward the Gulf, expanding effective supply and pushing freight rates down. A stable reopening of Hormuz, with reduced insurance premiums and greater willingness on the part of owners, would accelerate the process.
