Freight Costs Soar as Saudi Pipeline Restart Fails to Ease Oil Crunch

The return of the 7 million barrel-per-day pipeline provides a theoretical lifeline to supply chains, but restoring full capacity—roughly 4 million barrels per day—remains weeks away. Meanwhile, the freight market reflects a deepening crisis. Daily earnings for tankers on the Gulf-to-China route have hit $1.2 million, with some charter rates for Very Large Crude Carriers (VLCCs) climbing toward $100 million. Freight now constitutes at least 25% of the total cost of crude delivered to Asia, a sharp increase from 5-6% in 2025 that is rapidly eroding refiner margins.

Energy security remains fragile across several fronts. In Russia, a drone strike has idled the 230,000 barrel-per-day Moscow refinery, while in Libya, tribal disputes have slashed output at the El Sharara field by 65%. These supply disruptions coincide with seasonal pressures; Germany faces record-low gas inventories and a Rhine river chokepoint forecast to reach a 6 cm depth, effectively halting barge deliveries. As global demand outpaces infrastructure capacity, the industry is witnessing a shift in strategy: Asian refiners are increasingly abandoning VLCCs for smaller, more expensive Suezmax vessels, while trading firms like Trafigura are moving to integrate their own shipping fleets to bypass the volatility.