Global Oil Shipping Costs Top $20 a Barrel, Squeezing Asian Refinery Margins

Key Facts

The average cost of shipping crude oil by sea worldwide topped $20 a barrel in October 2026, compared with about $3 a year earlier, according to a Jefferies report cited by Macrostream. The report said shipping now accounts for more than 25% of the cost of crude on a delivered basis, including insurance and freight, up from 3% before the conflict. On the India route, shipping large crude carriers to the west coast cost $16 a barrel for crude loaded at ports within the Gulf, according to Financial Express. That compares with $2.5 before the war and $1.20 in the third quarter of 2025. The global figure does not represent the specific shipping rate to India, and the figure for the India route excludes war-risk insurance.

Higher transport costs are also weighing on refining profitability. Commodity analyst Natalia Katona estimated that shipping cuts refining margins by about $10 to $15 a barrel compared with calculations based solely on crude prices, according to Financial Express. The International Energy Agency said higher delivered crude costs pushed the margins of Asian refineries processing Middle Eastern crude into negative territory in September. That puts the cost of delivering crude at the heart of refinery calculations, alongside the purchase price. A Jefferies report said refining margins fell quarter on quarter but remained historically high. Singapore’s gross refining margin averaged $14 a barrel from the start of fiscal year 2027 through the date of the report.

The International Energy Agency linked higher shipping costs to the rerouting of trade flows, congestion around the Strait of Hormuz and increased ship-to-ship oil transfers. It said these factors extended delivery times and reduced fleet efficiency. By mid-October, the cost of transporting crude from the Gulf to Asia on a large carrier had exceeded $37 a barrel, more than five times its pre-war level. The cost of transporting crude from the U.S. Gulf Coast to Singapore was also about $33 a barrel over the same period. The agency said higher freight costs add pressure to energy costs in economies heavily reliant on imports, including India, which imports about 90% of its oil, according to the Associated Press.

On supply, a Jefferies report said crude flows from the Middle East, excluding Iran, had recovered to more than 90% of pre-conflict levels. The report also said refining margins had fallen from the previous quarter while remaining historically high, and forecast that they would continue to receive support during fiscal year 2027 because of the time needed for supply chains to normalize. High shipping costs remain a factor separate from the level of flows, determining what refineries pay to bring in crude. The International Energy Agency said refineries may turn to alternative grades from the United States or cut operating rates. It warned that lower operating rates could worsen tightness in diesel, kerosene and other oil products, while shipping costs from the U.S. Gulf Coast to Singapore limit the appeal of that alternative.

Alongside energy, the HSBC composite Purchasing Managers’ Index showed that Indian private-sector activity accelerated in October to 56.7 points from 55.9 in September, marking its fastest pace of growth since June, according to data reported by Reuters via MarketScreener. The index report attributed the improvement to services-led growth and an increase in new orders. Total export orders also recorded their fastest growth in six months. The manufacturing PMI, however, fell to 54.9 points from 55.1 in September. Input cost inflation, meanwhile, slowed to its lowest level in about a year, the report said.

Markets are awaiting the release of India’s industrial production index for September on 28 October 2026, the date set by the Ministry of Statistics and Programme Implementation. The index recorded annual growth of 8.0% in August, compared with 6.7% in July, according to the ministry. The upcoming data follow an improvement in private-sector activity growth in October and a slight decline in the manufacturing index from its September level. The published schedule does not include a preliminary estimate for September. The release will provide a new reading on industrial output after the results for the previous two months.