Oil
Surging shipping costs drive oil market tension
Global oil markets face renewed price pressures as soaring tanker freight rates replace crude supply shortages as the primary market driver.
Key points
- Delivered crude prices have returned to spring highs due to surging transportation costs rather than crude shortages.
- Increased movement through the Strait of Hormuz and U.S. sanctions on Iranian tankers have strained the global fleet.
- Soaring shipping expenses are squeezing European refining margins and raising the risk of processing run cuts.
Global crude oil markets are experiencing price dynamics reminiscent of April, though driven by entirely different underlying pressures, according to recent analysis from J.P. Morgan reported by Rigzone.
While the spring market stress stemmed from a physical scarcity of crude oil, current high delivered prices are primarily being driven by the cost and availability of maritime transport. Analysts noted that increased oil movements through the Strait of Hormuz since August have tied up a significant portion of the global very large crude carrier fleet.
Transport constraints tighten fleet
According to the reporting, U.S. sanctions affecting roughly 13 percent of the global VLCC fleet, combined with longer voyage times and ship-to-ship transfers, have severely restricted spare transport capacity. Transporting Middle Eastern crude now requires significantly more vessels across all major tanker categories compared to the 2025 average.
Consequently, freight rates have escalated sharply. Shipping a VLCC cargo from the Middle East to China has climbed substantially from early 2026 levels, adding upwards of $30 per barrel in transport costs alone for some routes.
Refining margins under pressure
Macquarie strategists noted in a separate report that broader Middle East exports have recently exceeded targets necessary to support market balance, helped by restored Red Sea volumes via the East-West pipeline. However, downstream vulnerabilities persist due to constrained refining capacity.
In Europe, sliding hydro-skimming margins suggest that refiners are finding it increasingly difficult to absorb rising acquisition and transport costs, elevating the risk of localized run cuts.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Crude benchmarks move budgets, currencies and inflation in producer and importer countries alike. For economies such as Nigeria, where fuels dominate exports, production and refining decisions move the whole economy.
9.5% of world merchandise exports were fuels in 2025Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
