Rising Tanker Costs Maintain Oil Price Risks, Citi Warns

(Oil & Gas 360) – A new analysis from Citigroup indicates that world oil prices remain at risk of spiking due to ongoing transportation bottlenecks and exorbitant tanker tariffs, even as crude exports out of the Persian Gulf show signs of rebound.

The financial institution noted on Thursday that while export volumes in the region are climbing, shipping efficiency has failed to keep pace. This gap leaves buyers and refiners facing exceptionally steep logistics expenses.

According to Citi’s figures, Gulf crude shipments (excluding Iranian barrels) rebounded to over 81% of pre-conflict volumes during September. Saudi Arabia drove much of this comeback, managing the surge despite lingering risks to commercial sea lanes and energy infrastructure.

Nevertheless, transporting those barrels has grown drastically more costly.

Charter rates for Very Large Crude Carriers (VLCCs) moving oil from the Persian Gulf to China recently neared $250 per metric ton—or roughly $35 for every barrel. Citigroup highlighted that these tariffs sit more than 20 times above their ten-year historical averages.

The price surge underscores a fundamental shift in how Middle Eastern petroleum is moved following interference along the Strait of Hormuz, long regarded as a primary global energy artery.

In September alone, over 1 million barrels per day—about 7.5% of total regional exports—underwent ship-to-ship transfers. Citi noted that such offshore transfers were almost unheard of in the region prior to the hostilites.

While these makeshift logistics channels have enabled crude to keep moving, they demand significantly more maritime equipment, vessel capacity, and complex handling.

The resulting overhead places heavy pressure on processors, particularly Asian refiners that rely heavily on Middle Eastern feedstock.

Rising landed costs for crude threaten to erode refining margins unless operators can pass those expenses along through higher retail prices for diesel, gasoline, and other fuels.

Concurrently, sky-high freight tariffs could undermine the market appeal of Gulf crude, potentially forcing regional suppliers to discount their official selling prices to preserve market share.

American energy producers may encounter distinct market dynamics. Shifting global trade flows could alter regional price spreads, reshape export demand, and boost interest in alternative crude grades.

At the same time, tanker firms and marine services stand to gain from elevated charter rates, though these revenues are tempered by inflated insurance premiums, physical threats, and operational delays.

The economic ripple effects extend well past upstream markets.

Elevated logistics expenses ultimately drive up the final cost of refined fuels like jet fuel and diesel, which are vital components for global supply chains, farming, heavy manufacturing, and commercial air travel.

Citi’s report arrives amid persistent strikes on regional shipping channels and energy facilities, casting doubt on the long-term stability of the Gulf’s export recovery.

While ramping up production and port capacity may bolster crude availability, bringing down landed prices will ultimately depend on reopening safe, direct maritime routes.

For energy market participants, key metrics to watch include shipping availability, freight tariffs, refinery economics, and delivered cargo counts to gauge whether rising supply will successfully stabilize global markets.

Ultimately, the analysis highlights a key market reality: higher production at the wellhead fails to lower energy bills when the logistical networks needed to deliver those barrels remain compromised.

Disclaimer

This informational, opinion, and insights article is provided for informational purposes only and does not constitute investment, legal, or financial advice. The views expressed are based on publicly available information and market conditions at the time of publication and are subject to change without notice.