Arabian Gulf-to-Far East VLCC crude shipping cost reaches record high

Oil prices rose in early European trading Thursday after Wednesday’s sharp rally, with Brent crude holding above $100 a barrel as markets assessed escalating attacks on Gulf shipping and renewed Houthi strikes on Saudi Arabia.

Front-month Brent crude futures gained 0.2% to $101.36 a barrel, while front-month West Texas Intermediate crude futures rose 0.3% to $96.36. Both benchmarks had traded mixed earlier in the Asian day after settling Wednesday at their highest closing levels since May 22.

S&P Global Commodity Insights said Platts Dated Brent, a benchmark for the spot-market value of physical crude, surged to $114.26 a barrel Wednesday. Middle East Gulf sour-crude exports averaged 5.88 million barrels a day in the second quarter, down 65% from a year earlier, the firm said.

The cost of shipping crude from the Arabian Gulf to the Far East on very large crude carriers reached a record high Wednesday. The Wall Street Journal reported that the increase came as security risks and uncertainty over shipping routes intensified.

HSBC analyst Kim Fustier said Thursday that the oil market is unlikely to rebalance until mid-2027. Fustier said flows through the Strait of Hormuz were expected to rise from around 6 million barrels a day currently to 8 million by year-end and 9.5 million by mid-2027.

Those projected flows would remain well below the prewar level of 19 million to 20 million barrels a day. HSBC raised its 2026 Brent forecast to $90 from $80 a barrel and saw prices around $120 a barrel in a prolonged-stalemate scenario.

The U.S. Energy Information Administration raised its assessment of the disruption in its September outlook released Wednesday. The agency estimated that Middle East crude-production shut-ins averaged 6.7 million barrels a day in August, up from 5 million in July.

The agency expected shut-ins to average 5.7 million barrels a day in the fourth quarter. It said most production and trade flows may not return to preconflict averages until the second quarter of 2027.

U.S. Central Command said earlier in the week that American forces had destroyed eight Iranian tankers in recent days in response to fresh attempts by Tehran to strike U.S. warships in the Middle East.

The U.K. Maritime Trade Operations Center said Wednesday that it had received reports of several merchant vessels being subjected to fire in the northern Persian Gulf and Gulf of Oman.

Iran’s Islamic Revolutionary Guard warned Wednesday of further restrictions on shipping around the Strait of Hormuz as Tehran seeks to challenge a U.S. naval blockade that has sharply curtailed its ability to export oil.

Separately, a coalition led by Saudi Arabia pledged a response after another round of Houthi attacks on the kingdom Wednesday.