MONTREAL (Oil Monster): OPEC and allied oil-producing countries have warned that shipping and insurance costs have reached unprecedented levels of more than one-third of the value of some energy cargoes, raising the cost of moving crude oil and refined products through disrupted global trade routes.
The ministers said the surge in transportation costs is delaying and complicating energy flows while adding inflationary pressure throughout the oil value chain.
The warning came during a meeting of OPEC and non-OPEC countries participating in the Declaration of Cooperation, held on the sidelines of the International Energy Forum ministerial meeting and the World Petroleum Congress in Riyadh.
The ministers said interruptions to global energy flows have pushed freight and insurance costs to unprecedented levels.
In some cases, the combined cost has reached more than one-third of the value of the underlying commodity, according to the OPEC statement.
That makes transportation a much larger component of the delivered price of crude oil and petroleum products than under normal market conditions.
The ministers said the increase is hindering the timely and efficient movement of oil through international markets.
The OPEC statement does not say that every crude oil or petroleum-product cargo currently carries shipping and insurance expenses equal to one-third of its value.
Rather, ministers said current freight and insurance costs have reached levels exceeding one-third of commodity value amid the severe disruptions affecting maritime energy trade.
The distinction is important because tanker rates, insurance premiums and security-related costs vary significantly depending on the cargo, vessel, origin, destination and route.
The warning reinforces a shift already identified by major commodity traders.
Vitol CEO Russell Hardy recently described the 2026 disruption as evolving from a crude-oil crisis into a refined-products crisis and then into a shipping crisis.
Hardy said freight prices had risen extremely quickly and that traders were struggling to predict transportation costs within several dollars per barrel.
ALSO READ: Vitol Says Middle East Oil Flows Are Critical as Shipping Costs Surge
Shipping costs have risen as tankers face greater security risk around major oil-export corridors, particularly the Strait of Hormuz and parts of the Red Sea.
Repeated attacks on commercial vessels have reduced available tanker capacity, forced operators to alter routes and increased the price shipowners demand to enter high-risk areas.
Insurance premiums have also risen as underwriters reassess the probability of vessel damage, delays and cargo losses.
The combination means that crude can remain physically available while becoming significantly more expensive to deliver.
ALSO READ: Hormuz Tanker Attacks Threaten Gulf Oil Export Recovery
Middle East crude exports have recovered substantially from the severe disruption seen earlier in the Iran conflict.
Saudi Arabia, the United Arab Emirates and other producers have restored volumes using a combination of Strait of Hormuz shipments, alternative pipelines, Red Sea terminals and ship-to-ship transfers.
However, the greater availability of physical crude has not returned logistics costs to normal.
Higher freight, insurance, vessel-security and transfer costs remain embedded in the delivered cost of many cargoes.
ALSO READ: Saudi Arabia, UAE Rebuild Crude Exports as Hormuz Recovers
The Strait of Hormuz remains central to the problem because a large portion of Gulf oil exports must still transit the waterway.
Recent tanker attacks have repeatedly reduced vessel traffic and forced producers and traders to rely more heavily on alternative routes.
OilMonster reported that commodity-vessel traffic through Hormuz has at times fallen to single-digit daily levels during the conflict.
ALSO READ: Strait of Hormuz Shipping Traffic Falls Sharply
The sharp rise in maritime transportation costs is also strengthening the economic and strategic case for additional pipeline capacity.
Saudi Arabia said this week that it wants to expand its ability to move crude through pipelines to as much as 10 million barrels per day.
The kingdom says it could add approximately 1.2 million bpd of crude transport capacity within seven to eight weeks by temporarily converting a domestic natural gas pipeline.
Further investment in the East-West Pipeline and associated pumping infrastructure could provide substantially more flexibility over the next several years.
ALSO READ: Saudi Arabia Targets 10M Bpd Pipeline Oil Export Capacity
OPEC+ ministers said elevated freight and insurance costs are transmitted across the oil value chain.
A producer may face higher costs moving crude to a refinery. Refiners can then face higher costs transporting gasoline, diesel, jet fuel and other products to consuming markets.
Those additional expenses can ultimately raise the delivered cost of fuel to businesses and consumers.
The ministers said the impact is increasing and prolonging the financial burden on both producing and consuming economies.
High crude prices do not necessarily translate into equally large gains for producers when the cost of delivering each barrel increases sharply.
Expensive tanker charters, insurance premiums and longer transportation routes can reduce the net value producers and traders receive from cargoes.
That pressure is particularly important for exporters that must offer price discounts to persuade buyers to accept security and transportation risks.
Iraq, for example, has used crude discounts to attract buyers as freight and insurance costs around Hormuz increased.
ALSO READ: Iraq Oil Exports Recover as Discounts Offset Shipping Risk
The surge in tanker costs extends beyond the Persian Gulf.
Freight rates for moving Russian Urals crude to India reached fresh records in early October as Black Sea security risks combined with tight tanker availability worldwide.
Reuters reported that a one-way Suezmax voyage from the Black Sea to India reached approximately $27 million to $30 million in October, compared with about $19 million in September.
The increase illustrates how geopolitical disruption in multiple regions is competing for the same limited pool of tanker capacity.
The ministers said safeguarding international maritime routes is essential to maintaining uninterrupted global energy flows.
The concern extends beyond crude-oil production itself.
Even when producers have sufficient barrels available, blocked or unsafe shipping routes can prevent that supply from reaching refineries and consumers efficiently.
In that environment, logistics can become as important to market availability as production capacity.
The ministers also reaffirmed their commitment to the production and market-stability decisions agreed at the June 7 OPEC and non-OPEC ministerial meeting.
They said consultations among participating countries would continue through established OPEC+ mechanisms, including the Joint Ministerial Monitoring Committee and ministerial meetings.
The statement did not announce a new production target or immediate change in OPEC+ output policy.
OPEC+ ministers said they would continue monitoring shipping conditions and engage with governments, industry stakeholders and international organizations.
The statement specifically referenced cooperation with organizations including the International Energy Forum and International Energy Agency.
The objective is to improve global shipping conditions and reduce the disruption affecting the movement of energy supplies.
The current market illustrates the difference between available oil and deliverable oil.
Production can recover and export volumes can rise, but a barrel that requires expensive insurance, multiple tanker transfers or a longer route around a conflict zone still costs significantly more to deliver.
That is one reason oil and fuel prices can remain elevated even when headline supply statistics show improvement.
The direction of freight and insurance costs will depend heavily on security conditions around the Strait of Hormuz, Red Sea and other major energy routes.
A sustained decline in tanker attacks and more predictable vessel traffic could reduce premiums and lower delivered energy costs.
Further attacks or disruption could instead tighten tanker availability, push freight rates higher and keep inflationary pressure embedded across crude and refined-product markets.
How high are oil shipping and insurance costs?
OPEC and allied ministers said current shipping and insurance costs have reached unprecedented levels of more than one-third of commodity value amid severe energy-flow disruptions.
Does that mean every oil cargo costs 33% of its value to ship?
No. The OPEC statement says costs have reached that level. Freight and insurance expenses vary significantly by route, vessel, cargo and security conditions.
Why have oil tanker costs risen so sharply?
Tanker attacks, maritime-security risks, tighter vessel availability, longer routes, additional ship-to-ship transfers and higher insurance premiums have all contributed.
Can shipping costs affect oil prices?
Yes. Higher transportation and insurance expenses increase the delivered cost of crude and petroleum products even when physical production is available.
What is OPEC+ doing about the problem?
Ministers said they will continue monitoring conditions and work with governments, industry stakeholders and organizations including the IEF and IEA to improve global shipping conditions.
Vitol Says Middle East Oil Flows Are Critical as Shipping Costs Surge
Hormuz Tanker Attacks Threaten Gulf Oil Export Recovery
Saudi Arabia Targets 10M Bpd Pipeline Oil Export Capacity
Saudi Arabia, UAE Rebuild Crude Exports as Hormuz Recovers
Oil Market Turmoil Could Last Years as Shipping Crisis Deepens
Sources: OPEC; Reuters.
Courtesy: www.reuters.com
