US Crude Becomes Too Costly for Most Asian Buyers as Tanker Rates Hit Records

Japanese refiner Cosmo Oil has provisionally chartered a very large crude carrier (VLCC) for about $81 million to load US crude oil on the Gulf Coast between November 19 and 21, according to traders and shipping sources cited on October 9. The company runs refineries in Chiba, Yokkaichi and Sakai, and its willingness to pay such a price shows how far Asian buyers are now prepared to go to secure barrels. The deal has become a symbol of a freight crisis that is reshaping global crude trade, as the cost of moving oil from the Americas to Asia now equals roughly $40 per barrel.

Data from shipbroker Simpson Spence Young showed that chartering a VLCC to carry about 2 million barrels of US crude from the Gulf of Mexico to China for November loading reached $80 million in the first week of October. At the start of 2026, the same voyage cost between $10 million and $15 million. Before the war on Iran began in late February, freight on this route stood at around $8.60 per barrel. Shipping now represents almost half of the price of a West Texas Intermediate futures contract, which means the trade no longer makes economic sense for most refiners, a situation traders describe as a closed arbitrage window.

The root of the problem lies in the Strait of Hormuz. Since the United States and Israel launched strikes on Iran in late February, commercial traffic through the waterway has collapsed, and Gulf producers have relied heavily on ship-to-ship transfers in the Gulf of Oman to keep part of their exports moving. These operations are slow and inefficient, and they keep supertankers waiting outside the strait for weeks. At the same time, Asian refiners have been importing much more crude from the Atlantic Basin to replace lost Middle Eastern supply, which requires long voyages and absorbs even more ships. June Goh, senior analyst at Sparta Commodities, said VLCC freight rates on the US Gulf to Asia route and on the Fujairah to East route have risen by more than 300% since mid-August.

Not every buyer has been able to secure a vessel. Attempts by South Korean refiner SK Energy and trading house Trafigura to book VLCCs for $76 million to $77 million failed, because shipowners hold the upper hand in negotiations. Some traders have turned to smaller Aframax tankers. Trafigura chartered the Aframax Torm Hilde, which can carry about 600,000 barrels, for $24 million to load US crude for Japan on November 1, while a separate $27 million Aframax deal arranged by Vitol for South Korea did not go through. Market reports also indicated that one supertanker was offered for $82 million on the US Gulf to Japan route, a 50% increase in only three weeks.

As US crude becomes too expensive to deliver, Asian refiners are looking for closer or cheaper alternatives. Strong interest in Murban crude from the United Arab Emirates pushed its premium over Dubai quotes back above $11 per barrel on October 8. One trading firm analyst estimated that Murban was still about $2 per barrel cheaper than WTI on a delivered basis in Asia. Argentina's Medanito grade and other Latin American supplies are also being considered, although some refiners still accept the higher cost of US oil to diversify their supply away from the Gulf.

The freight squeeze is also hitting transatlantic trade. Georgios Sakellariou, an analyst at Signal Maritime, said a VLCC recently carried US crude from the Gulf of Mexico to Europe for around $46 million, or about $24.50 per barrel including transfer costs. Before the conflict, the same volume could be shipped for about $6.5 million, close to $4 per barrel. European refiners therefore face the same difficulty as their Asian peers in securing affordable crude.

On the other side of the market, heavy crude is piling up in North and South America because it can no longer be exported profitably. According to price reporting agency Argus Media, flagship heavy grades from Canada, Colombia and Ecuador lost more than $10 per barrel over six weeks and fell to their lowest level in that period. On October 8, Western Canadian Select traded at about $74 per barrel, Colombia's Vasconia at about $84 and Ecuador's Oriente at about $76, excluding freight and insurance, while Venezuelan crude was priced around $74.50. Canadian production is at a record level, Venezuelan exports are rising and Washington has released more than 130 million barrels from its Strategic Petroleum Reserve, which adds even more supply to the region.

US refiners cannot absorb this surplus. They have been running at about 93.5% of their capacity in 2026, the highest level in 28 years, as record diesel prices encourage maximum output. Even plants designed for heavy oil can only process a limited share of it, since this requires spare capacity in the units that break down heavy residues. Many Gulf Coast refineries are also configured for offshore Mars Sour crude, so Canadian or Venezuelan barrels must be blended with lighter grades before processing.

The latest data shows that freight remains near record levels. The Baltic Exchange benchmark for a VLCC from the US Gulf to China reached an all-time high of $637,675 per day on October 8 before slipping slightly to $634,974 on October 9, its first decline since September 8. In its weekly recap of October 9, Clarksons Research reported that VLCC earnings averaged a record $805,000 per day worldwide, with freight now ranging between $20 and $45 per barrel and the US Gulf to China route at $37.50 per barrel, compared with $5 per barrel in 2025. Rates from the Middle East Gulf to Asia climbed to around $1.4 million per day in early October. Clarksons estimates that the current disruption is boosting crude tanker demand by more than 13% and that a cumulative 2 billion barrels of crude have not passed through Hormuz since the conflict began.

Security in the region remains fragile. A container ship and a dry bulk carrier sank near the strait after being hit by projectiles in separate incidents reported on October 14. On October 15, Brent crude fell by about 1.6% to around $104.40 per barrel, still well above $100, as investors weighed these attacks against reports that the US government is considering easing sanctions on shadow fleet tankers previously used to carry Russian, Iranian and Venezuelan oil. Such a move would release additional ships into the market and could help lower freight costs. The International Energy Agency also said that crude exports from Gulf producers recovered to around 75% of prewar levels in September, mostly through alternative routes and transfers.

For Japanese refiners such as Cosmo Oil, the outlook depends on how quickly tanker availability improves. Sparta's Goh noted that product margins must stay high for refiners to remain profitable with such delivery costs, and that Atlantic crude will likely keep flowing to Asia for supply security reasons even while the arbitrage looks closed. Until ship-to-ship operations in the Gulf of Oman ease or more vessels return to the market, the split between a crude glut in the Americas and tight supply in Asia and Europe is expected to persist.