Ship-to-ship transfers of Gulf crude spill over to India's Gulf of Kutch

Ship-to-ship transfers of Gulf crude have spread as far as the Gulf of Kutch off India's western coast, as the waters off Oman and the UAE used for post-Hormuz handoffs fill up, Bloomberg reported. Two VLCCs recently moved Gulf crude onto other supertankers there, and the receiving ships sailed on toward Singapore and South Korea.

Why it matters: The handoff system Gulf exporters have leaned on through the war is getting slower and more expensive. Transferring a full VLCC now takes about five to six days, Vortexa estimates, making STS work one of the biggest sources of delay on Gulf-to-Asia routes. Volumes have grown as Houthi threats to the Red Sea route pushed more Saudi barrels back toward Hormuz, and VLCC freight costs are now above USD 1 mn a day.

REMEMBER- Iraqi marketer Somo has started offering Basrah crude for ship-to-ship pickup near Oman, moving the handoff outside the Gulf even though much of Iraq's export system still depends on Hormuz.

Meanwhile, Indian refiners are sending their own tankers in

Indian refiners are going the other way, hiring tankers to cross Hormuz and collect crude themselves, Bloomberg reported. Indian Oil, Reliance, Bharat Petroleum, and HPCL-Mittal have recently bought Iraqi barrels on a free-on-board (FOB) basis, which leaves the buyer responsible for finding a ship and moving the cargo. Sinokor and Dynacom have already won tanker tenders under the new setup.

That reverses the caution refiners showed earlier in the war. India's direct Hormuz-linked crude imports fell from nearly 2.8 mn bbl / d in February to just 179k bbl / d in May, while volumes through alternatives such as Yanbu and Fujairah more than doubled between March and May.

Deep Iraqi price cuts help explain the change: Iraq has cut its October prices by as much as USD 37 per barrel, Bloomberg reported. That makes it more attractive for refiners to carry the shipping risk themselves than to pay someone else to take it on.

Buyers now carry the freight fill

Indian Oil has bought 2 mn barrels of Iraqi crude for October on an FOB basis. That means it has to secure a tanker, send it into the Gulf to load, and carry the freight and transit risk on the way back. Reliance took on the same setup earlier this year, booking a Sinokor VLCC to lift 2 mn barrels of Basrah crude for USD 23-25 mn, against roughly USD 2 mn before the war.

What's next: Iraq's November pricing will show whether the price cuts that drew Indian refiners back into Hormuz are holding.