50% Drop in Freight Costs Brings African and Brazilian Crude Back Into Asia’s Calculations
Key Facts
Asian buyers stepped up purchases of Atlantic Basin crude after freight rates for cargoes from Africa and Brazil fell, according to a Reuters report published on November 11. Rates for VLCC, Suezmax and Aframax tankers dropped about 50% from their peaks the previous month, excluding loadings inside the Strait of Hormuz, according to Baltic Exchange data cited in the report. That cut the cost of delivering African and Brazilian crude to China by $5 to $10 a barrel compared with the previous month. The moves highlight the impact of tanker freight rates on the competitiveness of long-haul grades among Asian buyers. Deals the previous week also showed that lower transport costs coincided with a marked divergence in crude prices relative to Brent.
Unipec, the trading arm of Sinopec, bought two cargoes of Congolese Djeno crude in the week before the report, at a discount of nearly $22 a barrel to dated Brent on a free-on-board basis. The deal shows the wider discount available to buyers for Congolese crude, alongside lower freight costs. By contrast, an independent Chinese refinery in Shandong bought 1 million barrels of Angolan Plutonio crude for delivery in late December or early January, at a premium of about $15 over ICE Brent. The two deals show how Atlantic crude prices vary by grade and delivery terms. Including both the purchase price and transport costs enables refineries to compare the final cost of barrels available from distant sources.
On the shipping side, Unipec provisionally chartered two Suezmax tankers to carry West African crude to Asia in late November and early December, at Worldscale 475 and 410. The company also provisionally booked a VLCC to load crude in early December at W500. SK Energy, in turn, booked a Suezmax tanker to load in Gabon and carry crude to Ulsan in December at W380. The bookings show buyers’ interest extended to cargoes from Congo, West Africa and Gabon, with arrangements spanning late November through December. These rates provide a practical indication of the freight buyers accepted for specific cargoes as market rates fell from the previous month’s peaks.
An increase in the number of available tankers in East Asia helped explain the correction in freight rates. A Vortexa shipping analyst said the number of loaded VLCC and Suezmax tankers in the region had risen about 15% since early September. A larger pool of loaded vessels means more may become available after discharging their cargoes, Reuters reported. At the same time, the report said higher exports by Middle Eastern producers the previous month increased the need for ship-to-ship transfers outside the Strait of Hormuz. Pressure on tanker demand coincided with greater vessel availability in East Asia, while freight rates fell from the previous month’s peaks.
The premiums on Brazilian Tupi crude varied as delivery costs shifted. The grade last traded at a premium of $7 to $8 a barrel over December dated Brent for cargoes arriving in January, according to a trader cited in the report. Deals the previous month had recorded premiums near $20 a barrel. The drop in the premium puts Brazilian crude among the options whose costs refineries are reassessing alongside freight rates. In the broader market, Brent futures settled at $92.76 a barrel on November 11, while West Texas Intermediate futures settled at $86.53, according to EL7 data.
Tanker rates had risen in October as oil flows were disrupted and vessel availability fell following attacks on tankers, according to the U.S. Energy Information Administration. The agency said the average spot price of Brent was $124 a barrel in October, up $10 from September and the highest since July 2022. That puts the roughly 50% fall in freight rates from the previous month’s peaks in the context of a market that saw a sharp rise in transport costs and crude prices in October. Reuters also attributed increased tanker demand to a shift by China’s independent refineries toward non-sanctioned oil after a U.S. blockade cut Iranian exports. The report said the refineries’ efforts to use crude import quotas before year-end added to tanker demand.
The market is watching for supply constraints to persist through November and December, with the U.S. Energy Information Administration expecting Brent to average about $100 a barrel in both months. The seven OPEC+ members are scheduled to hold their next meeting on November 29, 2026, to review market conditions. Freight rates and tanker availability are part of the calculations for bringing crude to Asia, alongside each grade’s price and delivery terms. In Brazilian oil deals, the report tracked Tupi’s premium for January delivery at $7 to $8 a barrel over December dated Brent, compared with premiums near $20 the previous month. The course of these prices and freight rates remains tied to the balance of supply and demand for vessels in the coming weeks.