Freight rates for Very Large Crude Carriers soared to their highest in more than two years, according to industry sources and LSEG data, as tanker supply tightens with a rise in Middle East exports and more arbitrage supplies to Asia.

The key VLCC spot rate on the Middle East to China route, known as TD3C (DFRT-ME-CN), jumped to W108 on the Worldscale industry measure, the highest level since November 2022, based on data compiled by LSEG. That is equivalent to at least $6.6 million, according to calculations by industry sources.

The rate has increased by nearly 150% since the start of this year.

“We are seeing continuous cargoes from ex-MEG (Middle East loading) and ex-Atlantic while the vessel tonnage list is balanced to tight,” a shipbroker told Reuters on Thursday.

Robust VLCC freight rates are yielding attractive earnings for shipowners this year, shipping industry sources said on the sidelines of the Asia Pacific Petroleum Conference in Singapore last week.

Crude exports from the Middle East are set to exceed 18 million barrels per day in September for the first time since April 2023, data from analytics firm Kpler showed, after the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, agreed to raise oil production.

Asia’s robust demand is also pulling arbitrage supplies from the Atlantic Basin, which will require tankers to travel longer distances. For example, Indian refiners boosted U.S. crude purchases for delivery in October and November while Chinese independent refiners are buying oil from Brazil and West Africa.

“The main drivers behind the surge in September has been the open arbitrage for U.S. Gulf to East Asia flows and the subsequent tightness created by vessels committing to these very long-haul voyages,” Sentosa Shipbrokers told Reuters, adding that this tightened vessel availability in the mainstream market.

Anoop Singh, global head of shipping research at Oil Brokerage, said Saudi Arabia is exporting more oil as demand for crude burn for power generation during summer ends while the arbitrage is wide open on strong Dubai crude prices.

“The short-term outlook is for the momentum to carry through till the end of the year and into Q1 next year,” he said, adding that the strength in Dubai prices could be further amplified if there is a loss in medium-quality crude supply, such as those from Russia under geopolitical pressure.

U.S. President Donald Trump said on Saturday that the U.S. was prepared to impose fresh energy sanctions on Russia, but only if all NATO nations ceased purchasing Russian oil and implemented similar measures.

Source: Reuters