Delivered Crude Prices Surge Back to Spring Highs as JPMorgan Flags Global Tanker Crunch
Key Takeaways
- •Hormuz shipments rose to about 12 million barrels per day in September from roughly 7.5 million in July and August, drawing more tankers into the region.
- •More than 80% of the global VLCC fleet was active by September, while ship-to-ship transfers and diversion around risky waters reduced vessel productivity.
- •US sanctions have sidelined approximately 125 Iranian VLCCs, representing about 13% of the worldwide fleet.
- •Atlantic Basin shippers are relying more on smaller tankers, with Aframax and Suezmax employment outside the Middle East rising 23% and 11%, respectively, versus the 2025 average.
The oil market has found its April again — only this time, the scarce commodity is the ship, not the crude.
That is the central argument of a JPMorgan research note dated October 9, which finds that delivered crude prices — the landed cost of a barrel, freight included — have climbed back to their spring peaks. At the same time, European refining margins — the spread between the value of refined products and the cost of crude input — have slipped below zero again, a level at which processing becomes loss-making and the risk of refinery run cuts rises. Yet the bank argues that the bottleneck in this episode is shipping capacity rather than a lack of crude: unlike April's shortage of oil, October's strain stems from the cost and difficulty of moving it.
The squeeze traces back to September, when Middle Eastern producers stepped up shipments through the Strait of Hormuz, the chokepoint at the mouth of the Persian Gulf. Flows rose from roughly 7.5 million barrels per day (mbd) across July and August to about 12 million in September, pulling a growing share of the world's tanker fleet into the region and absorbing much of the market's slack. By September, more than four in five of the world's very large crude carriers (VLCCs) — the biggest class of tanker, each able to carry around 2 million barrels — were in active service, leaving very little spare capacity.
JPMorgan says the issue is not only how many ships exist, but how productively they are being used. More vessels are tied up in ship-to-ship (STS), where cargo is moved between tankers at sea — a process that can occupy a ship for up to 10 days. Others are taking longer routes to avoid higher-risk waters. Both practices lengthen voyages and reduce the number of cargoes each tanker can complete, meaning more ships are needed to move the same volume of oil. The upshot is that the effective supply of tonnage shrinks even though the nominal fleet is unchanged.
Sanctions tighten the picture further. Around 125 Iranian VLCCs — equal to roughly 13% of the global fleet — are effectively shut out of the mainstream market by US measures, with many anchored or drifting in the Gulf or off Sri Lanka and Malaysia.
The bank estimates that moving Middle Eastern crude, excluding Iran, now requires an additional 35 VLCCs, 13 mid-sized Suezmaxes — the largest tankers able to pass through the Suez Canal fully laden — and 10 smaller Aframaxes, a mid-size class often used on shorter regional routes, compared with the 2025 average. As the region absorbs more of the fleet, VLCC employment elsewhere has fallen by 16 vessels, and demand has been pushed onto smaller vessel classes worldwide.
Atlantic Basin producers — those shipping from the Americas, Europe and West Africa — are adapting by switching to smaller ships, with one VLCC cargo roughly equivalent to two Suezmaxes or three Aframaxes. Outside the Middle East, Aframax employment is up by about 140 vessels, or 23%, versus the 2025 average, while Suezmax employment has risen around 50 ships, or 11%. JPMorgan concludes that what started as a regional VLCC shortage has become a broad tightening across the global tanker fleet.
For oil, the note describes a market where the cost of delivery, rather than the barrel itself, is setting the marginal price. That can widen the gap between benchmark futures and what refiners actually pay, and it tends to reward exposure to freight rates more directly than outright crude. Negative European refining margins raise the risk of run cuts, which would trim crude demand and could cap benchmark prices even while delivered costs stay high. Atlantic Basin grades moved on smaller ships carry higher per-barrel freight — a possible headwind for their competitiveness in distant markets.
What makes this episode distinct, the bank notes, is that more crude alone would not ease it: additional exports without additional ships could deepen the strain. The pace of Hormuz flows, rates for smaller tanker classes and any shift in US pressure on Iranian shipping are likely to decide whether this second April lasts as long as the first.
