Global crude freight costs jump above $20/bbl

The 14‑day moving average of global crude freight rates has risen by about $20 per barrel year on year.

The rally in crude freight prices began in the very large crude carrier segment on Middle Eastern routes but has now spread to all major crude trading routes, with long‑haul voyages particularly affected. Even though global freight rates have edged down slightly in recent days, the average remains about seven times higher than a year earlier.

Analysts identify five main drivers behind the year‑on‑year increase of about $20 per barrel in average global crude freight rates. A war risk premium for crossing the Strait of Hormuz accounts for $7 per barrel, or about one‑third of the increase. Ship‑to‑ship transfers outside the Persian Gulf, which keep tankers occupied for longer, add another $4 per barrel.

Higher maritime fuel prices contribute an additional $4 per barrel to freight costs. Inefficient tanker allocation and an increase in tanker redirections add $3 per barrel, while restrictions and blockage of the Iranian tanker fleet contribute $2 per barrel by tightening availability of compliant tonnage.

Rising tanker operating costs, including higher crew salaries and more expensive bunker fuel, have reinforced these pressures. Global maritime fuel oil prices have increased by nearly $50 per barrel, or about 70% year on year, amid weak exports from the Persian Gulf and Russia and sustained bunker demand from tankers and container ships.

The sharp rise in freight has significantly raised the share of transportation in the total cost of imported crude. In some cases, freight now accounts for more than a quarter of landed crude costs, compared with a low‑single‑digit share previously, eroding the benefit of lower crude premiums or recovering supplies.

High transportation costs are weighing heavily on refiners’ net margins, particularly for those in Asia and other regions that rely on crude imports from distant suppliers. These refiners face a choice between passing higher freight costs on to final consumers, where market conditions or regulation allow, or accepting lower net refinery margins.

Most traded crude benchmarks are priced on a free‑on‑board basis and do not include transportation directly, so elevated freight rates influence the market through changes in trading patterns and price differentials. Costly shipping can reduce refiners’ overall demand for crude or shift it towards suppliers that are geographically closer and cheaper to reach.

Crude producers that depend heavily on distant buyers may need to discount their cargoes more deeply to retain demand from refiners facing high freight bills. At the same time, high freight costs are seen widening crude price differentials, supporting refined product prices and constraining refiners’ ability to optimize arbitrage flows across regions.

The tanker market is adjusting in real time to the new risk and cost environment. More tankers are heading toward the Gulf region and more operators are willing to accept passage risk, but the impact is now spread across the broader tanker market, with benchmark routes reflecting these elevated costs.

Overall, the surge in freight rates makes physical oil deliveries more expensive and hampers the ability to close arbitrage opportunities between regions. This combination of higher logistics costs and reduced market flexibility is reshaping global crude and refined product flows while the conflict‑related drivers of freight remain in place.