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The $1 Million Tanker Was Just The Start: Every Crude Freight Index Hits Record High As Hormuz "Works" Too Well

Zero Rss
10 hours 12 minutes ago
The $1 Million Tanker Was Just The Start: Every Crude Freight Index Hits Record High As Hormuz "Works" Too Well

Just when we thought crude tanker rates couldn't go any higher, they did - again.

A week ago, a record million dollars a day charter for a supertanker was the punchline. Now it's the floor: the Baltic Exchange's TD3C, the benchmark Saudi Arabia-to-China VLCC route, hit yet another all-time high of $1.33 million per day on Monday, up 10% on the week and 21 times where it was a year ago!

But the real fireworks are elsewhere. As Lloyd's List's Greg Miller writes, the tanker market's "cascade" effect has gone into overdrive, with record VLCC strength spilling into suezmaxes, and suezmax demand in turn dragging up aframaxes:

Crude tanker markets hit a tipping point in mid-September, surging to a new level as more crude exited the Strait of Hormuz. Over the past three days, rates crossed another tipping point, spiking even higher due to the lagged global 'cascade' effect.

In other words, the better the Hormuz shuttle "works", the more expensive it gets to ship a barrel anywhere in the world.

Let's take a closer look at the carnage segment by segment, what Goldman, JPM and BofA say is driving it, and why the only thing standing between owners and $1.6 million a day is the refining margin.

"Available Tonnage Is Vacuumed Off Position Lists The Second It Is Marketed"

Regular readers know we have been tracking the tanker rate crisis since before it was cool - specifically February 20 - a week before the first Iran shots were fired, when the Baltic's Middle East-China VLCC route had "only" tripled to $151K a day. We were also on the $1 million milestone before it happened: "Mideast Chaos Sends Supertanker Rates Soaring To Near Record $1 Million A Day", a headline we upgraded from $800K within hours. Then on Sept 23, with rates on the Gulf-India route nudging $1 million, we put out this chart:

What changed in the past week?

According to Lloyd's List, Gulf producers decided to push more tankers through Hormuz under US military protection (even as Iran ratchets up attacks: UKMTO confirmed two separate projectile strikes on crude tankers in and around the Strait just over the weekend), which sharply increased near-term cargo supply and pulled more VLCCs to wait for ship-to-ship (STS) transfers in the Gulf of Oman. Clarksons Securities puts the wait for an STS slot at seven to 10 days, and estimates STS volumes have surged from 5-6 million barrels a day a month ago to 12 million b/d.

And since VLCCs loading via STS in the Gulf of Oman earn about 50% more than VLCCs loading in the Atlantic, with a much shorter ballast leg from Asia, owners are doing the rational thing. As Poten & Partners' head of tanker research Erik Broekhuizen put it:

"Even in a crazy market, shipowners tend to make rational decisions. The earnings discrepancy has kept VLCCs closer to the Asian market, leaving it to suezmaxes and aframaxes to do the heavy lifting out of the US Gulf, turbocharging their earnings."

Translation: the Atlantic has run out of supertankers. With few ballast VLCCs around, charterers have been forced to split 2 million-barrel stems into 1 million-barrel suezmax cargoes, and the result is what Fearnley Securities calls a market where "available tonnage is seemingly vacuumed off position lists the second it is marketed." Sparta Commodities summed it up even more concisely: "Atlantic freight is repricing violently on real tightness."

Parabolic Suezmaxes

Suezmax owners are the big winners. Atlantic basin suezmax rates more than doubled in three trading days, and they were already at or near record highs before the latest jump. On Monday:

  • US Gulf-Europe: $577,792/day, up 150% w/w
  • Guyana-Europe: $584,012/day, up 150% w/w
  • West Africa-Europe: $567,138/day, up 145% w/w
  • Black Sea-Med (with a Russia-Ukraine war premium on top): $801,077/day, up 115% w/w

Every single one of the Baltic Exchange's suezmax indexes hit an all-time high on Monday. For context, the US Gulf-Europe route was paying $90K at the start of September.

And now the cascade is running in reverse too: with suezmaxes (half the cargo) earning more than double what VLCCs do in the Atlantic, VLCC owners are simply holding out for more. The Baltic's West Africa-China VLCC index jumped 43% w/w to $697,160/day and US Gulf-China rose 20% to $473,958, both all-time highs. The Oman-China route, the one that actually captures the STS shuttle trade, was steadier at an "astronomical" $860,580/day, just shy of its Sept 17 record.

As for TD3C, Lloyd's List notes it is "perhaps the least relevant" index to actual owner earnings since almost no one sails direct from Saudi Arabia to China anymore - most crude is shuttled out to STS positions in a two-step process - but as a proxy for the total freight bill it is hard to beat. Nothing says "orderly market" like the benchmark route nobody uses hitting a record every week.

The Aframax Record Books Get Rewritten

Atlantic aframaxes had their moment in March, when panicked Asian buyers booked unusually long-haul aframax loads out of the US Gulf to replace Mideast crude. Those peaks were never revisited... until now. On Monday the Baltic's US Gulf-Europe aframax index was at $313,794/day (+44% w/w), Cross-Med at $343,227 (+19%), Caribbean-US at $335,288 (+70%) and North Sea-Europe at $348,651 (+10%). In early September most of these were paying $45K-$100K.

"Increased suezmax activity continues to provide further support for aframax demand," said Clarksons in its Monday brokerage report. Put simply, there is no class of crude tanker left that isn't being squeezed. And for those looking for the long-term perspective, here is John Kemp's inflation-adjusted Baltic Dirty Tanker Index: at 6,242 in October, it is now the highest on record in real terms, blowing past the November 2004 peak of 5,195.

Goldman: Gulf Exports Are Back... Which Is Exactly The Problem

Here is the paradox. Normally, more oil getting out of the Gulf would be bearish for freight. Not this time. As Goldman's commodity team wrote last week in "Adaptation: Persian Gulf Exports Return to 2025 Level" (available to pro subs), which we discussed at the time:

We estimate that Persian Gulf oil exports, including estimated "dark exports", have recovered to 23.3mb/d over the last week, in line with their 2025 average, as exports doubled in September. Increased Hormuz exports, including via ship-to-ship transfers, have driven the recovery despite the attack on the Saudi East-West pipeline (which disrupted flows to Yanbu for nearly two weeks) and the continuing Houthi blockade of Saudi exports via Bab-al-Mandab. Crude accounted for nearly 90% of the September recovery, reaching 19mb/d (108% of 2025 average)...

But while the barrels are back, the logistics are not.

A pre-war barrel took one voyage from Ras Tanura to Ningbo; today it takes a dark transit, a shuttle run, a 7-10 day wait off Fujairah or Sohar, a ship-to-ship transfer and then the long haul. Every one of those steps ties up tonnage. It's also why we have been saying since early March that Fujairah and the Hormuz bypass routes would become the center of the oil universe (a call Abu Dhabi is now putting tens of billions behind), and why the US Navy's billion-barrel escort operation has been, from the owners' perspective, the gift that keeps on giving.

JPMorgan's top oil strategist Natasha Kaneva made a similar point in her latest Oil Flash Note (available to pro subs): Hormuz throughput was back to ~13 million b/d, but "SoH transmission is not due to improved safety but improved ability to operate under risk," and freight rates were "~$1.27mm/day, a record." (They are higher now.) Goldman also points out that refined products are more flammable than crude, so the physical risks of a Hormuz crossing are greater for product tankers, which is one reason Gulf product exports are still stuck at ~50% of 2025 levels while crude is at 108%.

Meanwhile, Goldman's Rich Privorotsky summed up the market's take on Monday: "Plenty of threatened escalation and additional tankers hit, but diplomatic pathways remain open and, crucially, oil is getting out of the Gulf." Yes it is - at $1.33 million a day.

How High Can It Go? Ask The Refiners

For decades, $100,000 a day was the psychological bellwether of a VLCC upcycle. As Lloyd's List puts it, tanker shipping's "Overton window" now has an extra zero. Or as DNB Carnegie shipping analyst Jorgen Lian confessed at last week's Capital Link conference: "Our imagination is obviously not imaginative enough, because we've been lagging the reality by far." Spoken like a true sell-sider.

So where is the ceiling? It's set by the (parabolic) crack spread. If importers pay so much in freight that they can't earn a profit refining the crude, they stop shipping it. And with cracks at historic highs, that ceiling is a lot higher than anyone thought. Clarksons Securities lays out the math:

"As capacity gets scarcer, the balance shifts from owners competing for cargoes to charterers competing for ships. This is why refining margins matter so much. Once the supply curve is close to vertical, the question increasingly becomes how much the marginal cargo can afford to pay."

Per Clarksons, every $10/bbl increase in crude freight lifts VLCC TCE by ~$400K/day. Citing Argus, it estimates the Singapore product slate sold for $151/bbl last week, implying a pre-freight refining margin of ~$40/bbl, against Oman-Asia VLCC freight of ~$21/bbl, meaning "there is still considerable margin left for VLCC owners to capture." If owners grabbed the entire margin, which Clarksons admits is "unlikely in practice", Oman-China VLCC rates would be almost double current levels, at $1.6 million a day.

BofA's numbers back that up. The bank's Asian refining margin has been holding at roughly $35-45/bbl since August, more than four times its 5-year average (for more details see BofA's latest "The Oil Gusher" note)....

... while its European refining margin is at ~$49/bbl, with diesel cracking ~$90/bbl over Brent. That makes sense to anyone who has followed our coverage of the record diesel crack and Goldman's "nightmare" refining crisis warning; as we put it over the weekend, the US doesn't have an oil problem, it has a refinery problem. Turns out, so does the tanker market, only in a good way (for owners).

Two more factors stretch the ceiling.

  • First, energy security: state-controlled buyers may "temporarily overpay for freight to secure volumes now", particularly if they worry US protection of the shuttle tankers isn't guaranteed indefinitely.
  • Second, the share of freight in the delivered cost of crude, which Poten's Broekhuizen estimates has gone from ~3% at the start of the year to 27% now. Unprecedented for crude, though Breakwave Advisors notes Atlantic-to-China freight was more than 40% of landed iron ore cost last week - and capesize rates are nowhere near record highs. In other words, by dry-bulk standards, there is still room to run.
The Catch: Rates Don't Need More Ships To Fall

Before anyone extrapolates $1.6 million, Clarksons offers a crucial caveat:

"The reverse is also important. Rates do not need more ships to become available before they fall. If refinery margins weaken, charterers' willingness to pay can fall sharply even while vessel availability remains tight."

And that is where BofA comes in with the counterpoint. Its European refining margin strip is already in "(slight) backwardation", with the 4Q26 strip below the 3Q26 average of more than $42/bbl, and the bank models refining margins dropping to $15/bbl by end-2027. BofA's US refining team (in its "Refining roundup", also available to pro subs) is equally skeptical that the market should be paying up for a permanently higher crack, reiterating its "hesitance to buy into a +$3/bbl LT midcycle crack valuation." If the crack goes, the ceiling on freight goes with it - and we've seen this movie before: in June, tanker rates nearly halved in days on Hormuz normalization hopes, right after earnings had soared to $470,000 a day.

Meanwhile, the war itself isn't getting any calmer: per Bloomberg, the US blockade has now bottled up at least 50 tankers carrying Iranian oil, while Tehran's parliament speaker says the Strait won't fully reopen until the US meets seven conditions. Which, for now, is bullish for freight - right up until the ceasefire headline that sends it the other way.

Bottom Line

Lloyd's List puts the commercial logic simply: the spot rate "can be whatever charterers are willing to pay," with the caveat that charterers will, as financial pain increases, belatedly expand period coverage and reduce spot exposure. Or as Clarksons put it, "the rapid increase in Middle East crude flows has put the squeeze on all tanker classes."

Our take: with refining margins at $40+/bbl and Gulf barrels needing two or three ships to get to market instead of one, there is still near-term upside, and the Atlantic cascade has further to run as VLCC owners hold out for suezmax-equivalent economics. But the more important number may not be a TCE at all: freight is now 27% of the delivered cost of a barrel, which makes this an inflation story as much as a shipping one (as Bloomberg's Javier Blas warned in "The Next Inflation Shock: $1 Million-a-Day Oil Tankers" two weeks ago).

And when the owners themselves start ringing the register - Trafigura's tanker arm Volare jumped in its Oslo debut on Monday "as a wave of shipping IPOs builds" - history suggests the people who know ships best are selling them to the people who know them least. Enjoy the $1.33 million a day while it lasts: in shipping (as in everything else) nothing cures record rates like record rates.

Much more in the full Goldman "Adaptation: Persian Gulf Exports Return to 2025 Level" note and BofA's "The Oil Gusher: 3Q26 Playbook Part I" and "Refining roundup" notes, all available to pro subs.

Tyler Durden Tue, 10/06/2026 - 14:40
Tyler Durden

The Education Cartel And The Blue State School Scam

Zero Rss
10 hours 32 minutes ago
The Education Cartel And The Blue State School Scam

Authored by Jonathan Turley via JonathanTurley.org,

Below is my column in the Hill on the education cartel and how it is destroying our K-12 school system. After decades of bloated budgets and failing scores, our school system is now less popular than Cuba and communism. It is a particularly telling comparison in Chicago where union members went to Venezuela to praise the worker's paradise of the Maduro regime while the school system dumped U.S. bonds in opposition to the American "regime." Generations of inner-city children are being left without a future due to the failure of our school system, which prioritizes its own survival over its students.

Here is the column:

"In the first place, God made idiots," Mark Twain once wrote in an 1879 travel book. "That was for practice. Then he made school boards."

It appears that most Americans now agree with him. New polling shows that K-12 education has now reached a record low in the number of people who are even "somewhat satisfied" with the state of education in the U.S.

What is most troubling is that the near-total contempt for our school system does not make a bit of difference. Families and students have become largely irrelevant to an education cartel, a self-sustaining, self-perpetuating political alliance of unions and politicians.

According to Gallup, only 32 percent of American adults say they are "completely" or "somewhat" satisfied with the quality of K-12 education. That is the lowest figure in Gallup's 27 years of asking the question. Public satisfaction with the school system has dropped almost 20 points since just 2024.

For many of us, neither the drop in public support is surprising. The collapse comes at a time when universities are reporting that college students are entering higher education without basic math and other skills.

We have also seen the dismal decline in standards at elite universities like Harvard, where faculty have been compelled to teach high school-level math classes to students.

In May, faculty in the University of California system (which eliminated standardized testing to achieve greater equity in admissions) reported an alarming lack of math knowledge among new students.

Most recently, a University of California, San Diego, faculty report found a nearly 30-fold increase since 2020 in incoming students whose math skills fell below a high-school level.

For many of us, neither the drop in skills nor public support is surprising. For generations, the public school system has failed students in major cities. Despite massive budget increases, actual test scores continue to fall or remain at subpar levels.

In a prior column, I was particularly moved by the frustration of a mother in Baltimore who complained that her son was in the top half of his class despite failing all but three of his classes. Her story led to my changing my view of school vouchers. Despite my long support for public schools, I believe vouchers may be the only way to wrest control away from the education cartel by introducing real competition based on academic performance.

Faced with low proficiency scores, teachers' unions and school administrators have continued to lower proficiency requirements. They are simply pushing students out the door without basic skills, robbing these kids of any chance to break out of cycles of poverty and unemployment. When confronted with their poor performance, school board members have declared meritocracy to be a form of "white supremacy." Gifted and talented programs are being eliminated in the name of so-called "equity."

In any other field, such generational failure would be unthinkable. No business or enterprise could sustain itself. However, that is the point. There is little competition in this system. Blue states have largely blocked voucher systems while protecting teachers from performance-based standards.

Actual students have become irrelevant to budgets. In Chicago, there are schools that remain open despite 80 percent vacancy rates. One school, Frederick Douglass Academy High School has only 27 students, or 2 percent of its building's capacity. The school system spends $55,000 for each student at Frederick Douglass Academy.

Overall, 35 percent of Chicago schools are half full or less. But that did not stop the schools from spending a couple million on transcendental meditation sessions or giving teachers and students days off to join May Day protests (with city-subsidized buses).

According to a recent study, in 2025, Chicago Teachers Union spent a record $4.2 million on politics and lobbying but less than 18 percent on representing teachers. This included massive contributions used to elect former teacher and union organizer Mayor Brandon Johnson, a former organizer for the union. Johnson, in turn, has effectively turned over his office to the far-left union.

In economics, there are few scourges older and more damaging than the cartel, which uses its power over an area to create "higher prices, lower quality, and stifled innovation." There is a natural tendency for people to form such groups to stifle competition and feather their own nests. Adam Smith warned that "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public."

The Education Cartel is becoming one of the greatest and most insidious forms of such anti-competitive conduct. Teacher unions have used hundreds of millions of dollars in campaign contributions to acquire unchallenged power in blue states where they can dictate ever-increasing salaries, pensions, and budgets. One estimate found that, since 2015, the nation's two largest teachers unions - the National Education Association and the American Federation of Teachers - spent $669 million on federal campaigns and another $336 million on state and local campaigns.

Figures such as Randi Weingarten with the American Federation of Teachers effectively made their unions piggy banks for the Democratic Party and appear at far-left rallies to support Democratic causes. In return, Democratic leaders give this cartel most everything that the demand, including barring competition in the form of public vouchers or tying budgets to improving the education of actual students.

It is a closed circuit. Democratic leaders increase school budgets and salaries and the unions then send back hundreds of millions to fund Democratic campaigns.

If you want to understand the priorities of the unions, just watch one of National Education Association head Becky Pringle's unhinged speeches. Her declarations that the union will "win all of the things" clearly did not include educational improvements for students.

A recent study found that blue states with strong teachers' unions overwhelmingly have worse student literacy scores than red states. At least eight of the ten states with the worst literacy scores were liberal districts with politically powerful teachers' unions, according to the Progressive Policy Institute.

For example, in New York, more than half of third- to fifth-grade students failed their reading proficiency exams this year. And it isn't about money: The state spends almost $37,000 per student to fund this bloated, poor-performing bureaucracy. But the unions also pump political contributions into the campaigns of Democratic leaders in every election, and nothing changes.

In the meantime, historically poor states like Mississippi and Arkansas, with relatively new voucher and performance-based systems, are showing major improvements in scores among their students. Yet when these same policies are proposed in blue states, they are routinely blocked by the powerful teachers' unions.

Many liberals instinctively support unions and schools despite their costs. Recently, former New York Times journalist (and now Howard University Journalism Professor) Nikole Hannah-Jones drew criticism over an exchange with her daughter when she discussed her disappointment that her daughter would not stay at a majority-black, inner-city school despite its poor conditions and resources. Her daughter finally insisted on going to a private school out of concern for her own future as opposed to what Jones called supporting "her life's work."

Most families do not have the resources of Jones to make that choice. They are captives to a system that appears entirely detached and unresponsive to their same concerns as Jones's daughter.

The mark of a cartel is that it controls competition while inflating profits or costs. However, the education cartel makes you long for the old oil or even drug cartels. The difference is that the education cartel actually charges cartel prices while producing diminishing products. It is like OPEC watering down the gas at the pump while pumping up the price. Everyone is getting windfall profits, from the unions to the politicians. Only the kids are being shortchanged by America's school system.

Jonathan Turley is a law professor and the New York Times best-selling author of "Rage and the Republic: The Unfinished Story of the American Revolution."

Tyler Durden Tue, 10/06/2026 - 14:20
Tyler Durden

Bloodied Israel-bound jet passengers captured restraining co-pilot during suspected ‘jihadist terrorist attack’

NY Post
11 hours ago
A “jihadist terrorist attack” — That is what the Israeli government is calling the attempted hijacking of a Fly-dubai flight bound for Tel Aviv. The co-pilot allegedly attacked the other pilot in apparent attempt to wrest control of the aircraft. The Israeli defense minister said in a statement that, based on initial reports, quote: “The...
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