India's Reliance books supertanker at record freight price to lift Iraqi crude

NEW DELHI/LONDON: India’s Reliance Industries has paid a record $23 million to $25 million to charter a supertanker to lift Iraqi crude, pointing to a limited pool of ships available in the Gulf and the soaring costs of every voyage, three shipping sources said.

Shipping traffic via the Strait of Hormuz, through which Iraq’s seaborne oil must pass, is still well below the average of 125 to 140 vessels a day seen before the Iran war began at the end of February, putting further strain on buyers seeking to get cargoes out.

Reliance, the operator of the world’s biggest refining complex in India’s western state of Gujarat, booked the tanker to load 2 million barrels of oil at 1200 World Scale - a measure of freight costs, which was 12 times the benchmark freight rate, to lift Iraqi crude, the sources said.

That translated into a total cost of $23 million to $25 million for the charter hire - among the highest prices paid during the conflict, according to calculations by ship brokers.

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Before the war, freight costs were 0.8 to 0.9 times the benchmark, working out at about $2 million.

Despite paying the record freight rate, Reliance is still expected to save millions of dollars on the cargo because of steep discounts offered by Iraq’s state oil marketer SOMO, the sources said.

The vessel will be supplied by South Korea’s Sinokor, one of the few shipowners continuing to send tankers through the Strait of Hormuz as attacks on commercial vessels have increased the risks of navigating the waterway.

Reliance and Sinokor did not respond to emailed requests for comment.

Iraq is offering its crude at a discount of about $25 to $30 per barrel to Dubai benchmarks to entice buyers to lift cargoes from terminals inside the Strait of Hormuz, a document seen by Reuters this week showed.

Several Indian and Chinese refiners have sought vessels this week to enter the Strait and load crude at Iraq’s Basrah Oil Terminal, attracted by the steep discounts, other shipping sources said.

However, no vessels have been fixed so far as shipowners are wary of entering the waterway, they said.