Tanker Rate Spike Gives US Refiners an Edge as Washington Targets Cuba’s Fuel Fleet

Soaring tanker rates driven by the Iran conflict are turning into a competitive advantage for US Gulf Coast refiners. They are buying discounted heavy crude close to home while overseas rivals pay up to move oil across oceans.

Shipping crude from the US Gulf Coast to Asia now costs 30 to 35 dollars a barrel, up from about 5 dollars a year earlier, Valero Energy Corp. executive Randy Hawkins told analysts. “The main story right now in the market is freight rates,” he said. US refining margins more than doubled in the third quarter.

The jump has widened discounts on heavy grades such as Western Canadian Select, and more than 70% of Gulf Coast refineries are configured to process heavier crude. Phillips 66 estimates that every 1 dollar widening in the Canadian discount is worth about 140 million dollars. Valero, Marathon Petroleum Corp. and others chartered tankers before the war, which shielded them from spikes in spot rates. “Higher freight rates actually give us an advantage into the typical export markets into Latin America,” Valero Chief Operating Officer Gary Simmons said.

The US, meanwhile, has widened sanctions on Cuba’s maritime sector, designating five Cuban-flagged tankers and gas carriers as blocked property. The State Department action last Thursday targeted eight companies and two individuals. They include Cyprus-based Caroil Transport Marine Ltd. and Cuban shipping firm Petroleos Maritimos del Caribe, which manage the vessels.

The Treasury Department also issued a determination allowing sanctions on foreign companies operating in Cuba’s marine, manufacturing, electronics and technology sectors. That raises the risk for foreign shipowners and service providers that handle Cuban cargoes. The named vessels include the crude tankers Esperanza and Lourdes and the LPG carrier Emilia. Three had already been sanctioned under Venezuela-related measures.

The squeeze comes as Cuba struggles with fuel shortages and power outages. The State Department said humanitarian trade, including food and medicine, remains authorized.