Tanker shortage pushes delivered crude back to spring highs, JPMorgan says

In the oil market, the note says the marginal price is set by delivery costs, not the crude itself. This can increase the spread between benchmark futures and what refiners effectively pay, and it tends to reward freight exposure more directly than crude. Negative refining margins in Europe raise the chance of run cuts, which would cut crude demand and could keep benchmark prices in check even as delivered costs remain elevated. Grades from the Atlantic Basin transported on smaller vessels have higher per-barrel freight costs, potentially hurting their competitiveness in faraway markets.

The oil market is seeing a repeat of April, but this time what is scarce is tanker capacity, not crude oil.

The key summary points:

• JPMorgan states delivered crude has returned to spring peaks and European refining margins have gone negative again, increasing the likelihood of refinery run cuts.
• The bank differentiates this from April's crude shortage, noting the current strain stems from the cost and challenge of transporting oil.
• Hormuz flows from the Middle East increased from about 7.5 mbd in July–August to around 12 mbd in September, with over four in five of global VLCCs employed.
• Ship-to-ship transfers taking up to 10 days and extended routes to avoid risks are reducing the number of cargoes each tanker can handle.
• Some 125 Iranian VLCCs, representing roughly 13% of the global fleet, are mostly shut out of the mainstream market by US sanctions.
• Excluding Iran, Middle East crude now requires an additional 35 VLCCs, 13 Suezmaxes, and 10 Aframaxes compared to the 2025 average, driving demand onto smaller vessels worldwide.

According to an October 9 JPMorgan research note, oil markets are experiencing the same stress as April, but the reason has shifted. Delivered crude prices have risen back to spring highs, and European refining margins have again fallen below zero, heightening the risk of refiners reducing throughput. The bank contends that the current constraint is shipping capacity, not crude supply.

The tightness dates to September, when Middle Eastern producers increased shipments via the Strait of Hormuz. Volumes climbed from about 7.5 million barrels per day over July and August to roughly 12 million in September, drawing an increasing portion of the tanker fleet to the region. By September, over four-fifths of the world's very large crude carrriers (the largest tanker class, each capable of transporting approximately 2 million barrels) were in operation, resulting in minimal spare capacity.

JPMorgan notes that the problem is not just the number of ships, but also their utilization efficiency. More vessels are engaged in ship-to-ship transfers (moving cargo between tankers at sea), which can tie up a ship for as long as 10 days. Others are taking longer itineraries to steer clear of high-risk areas. Both factors extend voyage times and cut the number of cargoes each tanker can finish, meaning more ships are required to transport the same quantity of oil.

Sanctions exacerbate the situation. Approximately 125 Iranian VLCCs, equivalent to about 13% of the global fleet, are effectively barred from the mainstream market by US measures, many of them anchored or adrift in the Gulf or near Sri Lanka and Malaysia.

The bank calculates that transporting Middle Eastern crude (excluding Iran) now demands an additional 35 VLCCs, 13 Suezmaxes, and 10 Aframaxes relative to the 2025 average. As the region consumes more of the fleet, VLCC employment in other areas has dropped by 16 vessels.

Producers in the Atlantic Basin are adapting by moving to smaller vessels, since one VLCC cargo is roughly equal to two Suezmaxes or three Aframaxes. Outside the Middle East, Aframax employment has increased by about 140 ships (23%) over the 2025 average, and Suezmax employment has risen by about 50 ships (11%). JPMorgan concludes that what began as a regional shortage of VLCCs has evolved into a widespread constraint across the entire global tanker fleet.

What sets this episode apart is that simply adding more crude would not relieve the situation; increasing exports without more ships could aggravate the strain. The speed of Hormuz flows, rates for smaller tanker categories, and any changes in US pressure on Iranian shipping will likely determine whether this second April persists as long as the first.