Freight Costs Leave Americas With Heavy Oil Glut as Europe and Asia Face Supply Shortages

Rising tanker costs and limited shipping capacity have left large quantities of heavy crude oil stranded in North and South America, even as refiners in Europe and Asia struggle to secure supplies and global oil prices remain above $100 per barrel.

The unusual imbalance reflects growing disruption in the international oil trade. Producers in the United States, Canada, Colombia, Ecuador and Venezuela have crude available for export, but the cost of transporting it to major Asian markets has surged beyond levels that many buyers can comfortably absorb.

Shipping a supertanker carrying oil from the US Gulf Coast to Asia cost more than $80 million last week, equivalent to about $40 per barrel. At the beginning of the year, the same journey typically cost between $10 million and $15 million.

Freight costs for shipments from the US Gulf Coast to Europe have also climbed sharply, reaching an estimated $46 million per tanker, or approximately $24.50 per barrel. Before the conflict involving Iran began in late February, the cost was about $6.5 million per shipment.

The shipping squeeze has pushed down prices for several heavy crude grades. Western Canada Select, Colombia’s Vasconia and Ecuador’s Oriente have each fallen by more than $10 per barrel over six weeks, reaching their lowest levels in that period.

Meanwhile, US refineries are operating close to their limits. Average utilisation has reached 93.5 per cent so far this year, the highest level in 28 years, leaving limited room to absorb additional crude supplies.

The situation is particularly striking because heavy crude produces relatively large quantities of diesel, a fuel in short supply in several markets. However, high transport costs and limited refining capacity are preventing the available oil from reaching buyers efficiently.

The disruption highlights how shipping bottlenecks can create shortages in some regions and surpluses in others, even when crude oil remains available. Unless freight costs ease or additional transport capacity becomes available, the imbalance could continue to distort regional oil prices and complicate efforts to stabilise fuel supplies.