Surging Oil Freight Rates: How Tight Supply Could Impact Your Business Costs and Investments
SINGAPORE: Freight rates for Very Large Crude Carriers (VLCCs) have surged to their highest level in over two years, fueled by increasing Middle East oil exports, robust demand from Asia, and tighter vessel availability.
The key VLCC spot rate on the Middle East-to-China route (TD3C) climbed to W108 on the Worldscale index—the highest since November 2022—equivalent to at least $6.6 million per voyage, according to industry estimates. Since the beginning of 2025, rates have risen by nearly 150%.
A shipbroker told Reuters that continuous cargo shipments from the Middle East and the Atlantic coincide with a vessel supply that is balanced but tight.
Crude exports from the Middle East are projected to surpass 18 million barrels per day in September, marking the highest level since April 2023, following OPEC+’s agreement to boost oil production. Meanwhile, strong crude demand in Asia is attracting supplies from the Atlantic Basin, necessitating longer tanker journeys.
For instance, Indian refiners have increased purchases of US crude for delivery in October and November, while Chinese independent refiners are sourcing oil from Brazil and West Africa. These extended voyages have absorbed more vessels, tightening availability in key shipping lanes.
Sentosa Shipbrokers explained that the surge in September is mainly driven by open arbitrage opportunities for US Gulf-to-East Asia shipments and the resulting vessel tightness caused by the long-haul commitments.
Anoop Singh, global head of shipping research at Oil Brokerage, noted that Saudi Arabia’s crude exports have increased as domestic power generation demand declines after the summer months. Additionally, strong Dubai crude prices continue to support open arbitrage.
Singh forecasted that this momentum is likely to persist through the end of the year and into the first quarter of next year, highlighting that any disruptions to medium-quality crude supplies—such as Russian grades affected by geopolitical tensions—could further elevate prices and tighten the market.
Separately, US President Donald Trump stated on Saturday that the United States is prepared to impose new energy sanctions on Russia, but only if all NATO countries cease purchasing Russian oil and adopt similar measures.
— Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The surge in VLCC freight rates driven by rising Middle East oil exports and strong Asian demand signals lucrative opportunities for Oman’s shipping and logistics sectors, as vessel scarcity tightens mainstream shipping routes. However, businesses and investors should be mindful of geopolitical risks, especially potential sanctions on Russian oil, which could further restrict supply and heighten market volatility. Smart entrepreneurs might consider investing in strategic shipping assets or logistics infrastructure to capitalize on prolonged high freight rates and shifting trade flows.
