JP Morgan: Oil
October is increasingly resembling April, with delivered crude prices back at spring highs, European refinery margins turning negative and the risk of run cuts rising. However, the underlying issue has shifted from crude scarcity to transportation constraints. Increased Middle Eastern oil flows through the Strait of Hormuz, which rose to around 12mb/d in September from 7.5mb/d in July and August, have tightened tanker availability, with most of the global VLCC fleet already in active use. Longer voyages, ship-to-ship transfers and rerouting around high-risk areas are reducing tanker utilisation efficiency, while US sanctions leave around 124 Iranian VLCCs effectively unavailable to much of the international market. As vessels spend more time moving each cargo, more capacity is needed to transport the same volume of oil, increasing freight costs and putting upward pressure on delivered crude prices. Transporting Middle Eastern crude outside Iran now requires an estimated additional 35 VLCCs, 13 Suezmaxes and 10 Aframaxes compared with the 2025 average, leaving other regions competing for a shrinking pool of large tankers. Atlantic Basin producers are increasingly shifting to smaller
October is increasingly resembling April, with delivered crude prices back at spring highs, European refinery margins turning negative and the risk of run cuts rising. However, the underlying issue has shifted from crude scarcity to transportation constraints. 5mb/d in July and August, have tightened tanker availability, with most of the global VLCC fleet already in active use. Longer voyages, ship-to-ship transfers and rerouting around high-risk areas are reducing tanker utilisation efficiency, while US sanctions leave around 124 Iranian VLCCs effectively unavailable to much of the international market.
As vessels spend more time moving each cargo, more capacity is needed to transport the same volume of oil, increasing freight costs and putting upward pressure on delivered crude prices. Transporting Middle Eastern crude outside Iran now requires an estimated additional 35 VLCCs, 13 Suezmaxes and 10 Aframaxes compared with the 2025 average, leaving other regions competing for a shrinking pool of large tankers. Atlantic Basin producers are increasingly shifting to smaller vessels, with Aframax employment up 23% and Suezmax employment 11% versus the 2025 average.
This spreads the capacity squeeze across the global tanker market, raising transportation costs and increasing pressure on refinery margins.