According to shipbroker BRS, more than 140 oil tankers — most of them VLCCs — are now dedicated to a recently established Middle East shuttle crude trade that is likely to remain in place over the medium to long term.

In its latest weekly report, BRS said the shuttle network, which moves crude from export terminals inside the Arabian Gulf to locations in the Gulf of Oman and along India’s west coast, began forming in mid-April and gathered momentum in June. Cargo is then transferred at those locations to other tankers for onward transportation. The trade reflects measures taken by Middle Eastern oil companies to maintain crude exports amid rising security risks in the Strait of Hormuz.

BRS said the development was a necessary response, as most private shipowners and charterers have been unwilling to expose their vessels to attack risk after the strait effectively closed to normal commercial traffic.

Crude exports from the Arabian Gulf via the Strait of Hormuz fell sharply from 16.3 million barrels per day in February to 1.7 million bpd in March, most of it Iranian oil.

BRS estimates that 141 tankers are now dedicated to shuttling crude and oil products. VLCCs account for the largest share, representing 72 percent of all vessels involved in the trade. “This reflects the fact that historically around 80 percent of Middle East crude exports have been carried by VLCCs. Even though the shuttle voyages are relatively short, VLCCs’ superior economies of scale remain attractive compared with Suezmax and Aframax tankers.”

Given this, together with the share of the VLCC fleet belonging to the so-called “grey fleet,” the effective tonnage available for mainstream trade is equivalent to only 68 percent of currently active operating vessels. The VLCC fleet last reached a level this tight in 2015.

Waiting times are further tightening supply. BRS said AIS data shows frequent ship-to-ship transfers are causing serious delays for vessels loading and discharging in the Gulf of Oman, with waiting times sometimes stretching to several weeks.

Vessels appear to face longer delays when leaving the region than when entering it. BRS explained: “This may be related to external threats, waiting for STS vessels to arrive, or even sluggish cargo sales.”

However, shuttle efficiency seems to have improved in recent weeks. BRS noted that data shows the average time for a shuttle tanker to enter the Arabian Gulf, load and depart has fallen from 25 days in August to 14 days.

On the outlook for the trade, BRS said that even if a peaceful and sustainable resolution to the conflict were reached tomorrow, shuttle operations would likely remain a feature of the Middle East tanker market in the medium and possibly longer term, given that security conditions in the Strait of Hormuz remain unstable. A peace agreement could, however, encourage more owners to send vessels through the strait, thereby reducing demand for shuttle services.

BRS added: “In any case, there is another possibility: exporters could, if they wish, include clauses requiring buyers to lift cargo in the Gulf of Oman rather than inside the Arabian Gulf. Given that Iranian threats may reappear periodically, it would be unwise for Middle East exporters to fully dismantle or redeploy the shuttle networks they have spent heavily to establish.”

Over a longer cycle, most regional producers are expected to expand pipeline networks and export infrastructure to bypass the Strait of Hormuz. But this may not eliminate demand for shuttle services; it could merely cause that demand to shift as security risks change.