Why does the crude oil price remain under pressure despite falling shipping costs

Temporarily Lower Freight Rates Are Not Enough to Support the Market

A temporary easing in maritime shipping costs provided a brief respite for U.S. crude oil prices this month. According to TP ICAP analysts, major trade routes are normalizing, with shipping costs from American and British coasts to Asia decreasing. This reduction has generated increased demand for U.S. crude oil and a slight rebound in benchmark prices. However, behind this apparent calm lies a more complex and concerning reality for the global energy market.

Geopolitical Sanctions and Fleet Aging Transform the Market

The real story behind the rise in freight rates is not simply a matter of supply and demand but a perfect storm of structural factors. Starting from late November, U.S. sanctions against Russian oil giants Rosneft and Lukoil have drastically reduced the fleet of tankers available for international transport. This restriction was further exacerbated by the seizure of the Bella 1 vessel this week, increasing geopolitical tensions and further reducing transport capacity.

Fleet aging is another structural constraint. With increasingly strict safety standards, shipowners often retire ships after 15 years of service. Currently, nearly 44% of the global tanker fleet has reached this obsolescence threshold, and 18% of these are subject to direct sanctions. As a result, the number of actually operational units continues to decline.

Extreme Volatility in Freight Rates Signals Underlying Instability

Numbers tell a story of unprecedented volatility. By the end of 2024, freight rates on major trade routes reached alarming levels: Very Large Crude Carriers (VLCC) saw daily rates spike to $130,000 during peak demand from OPEC+. Although a correction of 20% occurred between December 19 and 22 according to Lloyd’s List, rates remain at $83,882 per day— the highest since 2020, when the market was dominated by floating storage boom.

To contextualize this escalation: freight rates on key routes have increased by 467% since the beginning of last year. This extraordinary rise has even forced new Very Large Crude Carriers to start their maiden voyages empty, a rare tactic aimed at positioning in high-yield producing zones.

OPEC+ Production Increase Further Tightens the Market

A disturbing paradox emerges from the production side: while shipping costs rise, crude oil production by OPEC+ and the United States continues to grow. This mismatch between increasing supply and limited transport capacity creates conflicting pressures on crude oil prices. High-sulfur crude, in particular, continues to face downward pressure after President Trump announced plans to import millions of barrels of Venezuelan oil into the U.S.

What the Future Holds: A Market Likely to Remain Tense

The outlook is complex. It is expected that the utilization of supertanker fleets will reach 92% in 2026—the highest in seven years, compared to 89.5% last year. While this increase in utilization appears positive, it means the maritime market will operate without safety margins, amplifying the risk of price shocks in case of sudden disruptions.

Sanctions will continue to play a critical role. As the U.S. expands its sanctions regime against oil tankers, the number of available units will further decrease. Reuters has documented how this progressive restriction is completely reshaping the geography of global oil trade.

The only scenario capable of significantly depressing freight rates—and consequently crude oil prices—would require a drastic drop in oil demand. However, such a decline would presuppose a substantial increase in prices themselves, creating a vicious cycle that is difficult to trigger given the current market structure.

In conclusion, the recent temporary decline in shipping costs is an exception within a broader trend toward elevated and persistent rates. For those tracking crude oil prices in global markets, this reality suggests that any relief will likely be short-lived, with structural pressures poised to dominate price dynamics in the medium term.

Energy Market Analysis

Related readings:

• The Impact of Capacity Restrictions on Global Oil Prices
• Geopolitics and Oil Trade: How Sanctions Reshape Flows
• Fleet Aging: A Hidden Crisis in Maritime Transport