Freight for Very Large Crude Carriers (VLCCs) from the Mideast Gulf to the United States has fallen to below $1 per barrel for the first time in over two years.
Oslo brokers said on Wednesday that Exxon had fixed the VLCC Agios Nikolaos for a 269,000 ton cargo to the U.S.Gulf in the first week of July at W35 ($0.99 per barrel).
Eastbound rates have also followed suit, and fixture lists on Wednesday showed two fixtures at W38: the Napa and the New Vista.
The Napa fixture to Thailand in the first week of July represents $0.39 per barrel, while the New Vista fixture to the Far East represents $0.64 per barrel. Both equate to levels almost a quarter of what they were at the start of the year.
London brokers said on Tuesday that the slump was directly linked to the Iraqi-standoff and that there was little prospect of improvement this summer.
Iraq halted its 2.1 million barrels a day of U.N. supervised crude sales on June 4 in protest at Anglo-American plans for a revamp of Gulf War sanctions.
Million-barrel tankers have sustained further losses this week, undermined by the VLCC market.
Two VLCC fixtures were concluded out of West Africa at W52.5 ($0.76 per barrel), a fall of over seven points on Friday's levels.
Cheap VLCCs started undercutting million-barrel ships back in April, dragging rates down from W125 ($1.65 per barrel) at the start of May to W82.5 ($1.09 per barrel) today.
The contagion has also spread to the Mediterranean, which is also highly dependent on Iraqi loadings.
Wednesday fixture lists show two million-barrel fixtures from the Black Sea to Europe, the Stemnitsa and the Iran Semnan, at W80 ($0.45 per barrel), indicating that about five points have been eroded from last Friday's W85 ($0.47 per barrel).
Smaller ships have also suffered, with 70-80,000-ton vessels charging W95 in the North Sea ($0.50 per barrel), W120 in the Med ($0.58 per barrel), W135 in Asia Pacific ($1.25 per barrel) and W160 in the Caribbean ($1.18 per barrel).