Oil Prices Are Already Soaring. Their ‘Real’ Cost Could Be Much Higher, Analyst Says.

Oil buyers are facing shipping costs that can add nearly $40 to the price of a barrel as record tanker charter rates and disruptions linked to the Iran war drive up the expense of transporting crude across global markets.

A supertanker traveling from the U.S. Gulf Coast to China was reportedly chartered for $76 million last week, roughly 10 times the cost of a comparable voyage less than a year earlier.

The vessel, a very large crude carrier capable of transporting approximately 2 million barrels, would incur shipping expenses of about $38 a barrel at that charter price before accounting for the cost of the crude itself.

Another tanker traveling from the United States to South Korea was reportedly booked for $77 million, according to CNBC. The unusually expensive voyages illustrate how the cost of buying and delivering physical oil can differ from benchmark prices displayed on financial markets.

The figures represent individual charter agreements, however, and do not mean every barrel of oil carries an additional $38 to $40 in transportation expenses.

The difference between financial benchmarks and physical crude prices has become increasingly pronounced amid supply disruptions and elevated transportation costs.

The International Energy Agency said in its October Oil Market Report that Brent crude futures had increased 13% since the beginning of September to approximately $107 a barrel at the time of its assessment.

Physical crude prices rose considerably faster, with North Sea Dated crude climbing 43% to around $134 a barrel. Some other North Sea grades were trading as high as $160.

The agency attributed the increases to renewed hostilities in the Middle East, stronger purchases by Asian refiners and sharply higher freight costs.

North Sea Dated crude averaged $116.89 a barrel in September, an increase of $26.17 from August. The difference between physical benchmarks and futures prices reflects several market factors, including supply conditions, crude quality and delivery terms. It should not be interpreted entirely as an additional shipping charge.

Shipping expenses have retreated from their recent peaks on some major routes, although they remain historically elevated.

Freight rates for very large crude carriers transporting oil from the Gulf of Oman to China fell to approximately 776 on the Worldscale index this week, compared with a record 841 the previous week, according to Baltic Exchange data cited by Reuters.

Worldscale is a freight pricing system used in tanker markets, rather than a direct quotation of the total cost of a voyage in dollars. The decline followed a reduction in demand for vessels operating on the route after renewed attacks on commercial shipping in the Middle East.

Rates also eased on routes connecting West Africa and Asia. Despite those declines, the cost of transporting oil remains substantially higher than before the conflict, with shipping companies facing security concerns, longer voyages and limited vessel availability.

The U.S. Energy Information Administration said in its October Short-Term Energy Outlook that increased risks associated with tanker movements had pushed up freight and insurance costs.

Some vessels have been taking longer routes to avoid conflict zones, reducing the number available to transport additional cargoes.

Oil shipments through the strait recovered significantly in September as Gulf producers increased exports and made greater use of ship-to-ship transfers.

According to the IEA, total oil flows through Hormuz increased by 3.7 million barrels a day to 10.9 million barrels a day during the month.

Crude exports from Gulf producers rose by 4.4 million barrels a day to 13.9 million barrels a day, reaching more than 75% of their pre-war levels. However, attacks on regional infrastructure continued to interfere with supply routes.

Saudi Arabia's East-West pipeline, which allows crude to reach the Red Sea without passing through Hormuz, was temporarily disrupted following attacks in September.

Before the interruption, the pipeline was transporting more than 5 million barrels a day of exports through Saudi Arabia's Yanbu port, according to the EIA.

Higher freight expenses have also affected refining companies that purchase crude and turn it into gasoline, diesel, jet fuel and other petroleum products.

The IEA said record transportation and crude acquisition costs had significantly reduced refining margins in Europe and Asia. U.S. refiners, meanwhile, benefited from access to relatively discounted crude supplies.

Diesel markets have been particularly affected by disruptions to Middle Eastern and Russian exports. Global diesel exports in September were approximately 700,000 barrels a day below their level a year earlier. Reduced supplies from the Middle East and Russia were only partly offset by additional exports from other producing regions.

Wholesale diesel prices exceeded $200 a barrel in Singapore during September and reached record highs of approximately $220 in Europe and the United States.

Although prices have since eased, the IEA said diesel benchmarks remained nearly twice their pre-crisis levels. Governments have been drawing on emergency petroleum reserves to help address shortages caused by the conflict.

The International Energy Agency said Thursday that member countries had released approximately 330 million barrels of oil under the collective action announced in March. Around 100 million barrels of previously agreed releases remained outstanding, with member countries committing to accelerate deliveries where possible.

The agency also announced plans to expedite the release of more than 20 million barrels of diesel as part of efforts to address tight fuel supplies.

Global observed oil inventories fell by 10 million barrels in September, leaving stocks 509 million barrels below their levels at the end of February, according to the IEA's latest monthly assessment.

The agency expects global diesel and other middle-distillate supplies to remain constrained well into 2027, following prolonged disruptions to production, refinery operations and international trade.