For oil, the note describes a market where the cost of delivery, rather than the barrel itself, is setting the marginal price. That can widen the gap between benchmark futures and what refiners actually pay, and it tends to reward freight exposure more directly than outright crude. Negative European refining margins raise the risk of run cuts, which would trim crude demand and could cap benchmark prices even while delivered costs stay high. Atlantic Basin grades moved on smaller ships carry higher per-barrel freight, a possible headwind for their competitiveness in distant markets.
The oil market has found its April again, only this time the scarce commodity is the ship, not the crude.
Summary:
- JPMorgan says delivered crude prices are back at spring highs and European refining margins have turned negative again, raising the risk of refinery run cuts
- Unlike April’s crude shortage, the bank says October’s strain comes from the cost and difficulty of moving oil
- Middle East flows through Hormuz rose from around 7.5 mbd in July and August to about 12 mbd in September, with more than four in five of the world’s VLCCs in use
- Ship-to-ship transfers of up to 10 days and longer risk-avoiding routes are cutting how many cargoes each tanker can deliver
- Around 125 Iranian VLCCs, roughly 13% of the global fleet, are largely unavailable to the mainstream market due to US measures
- Middle East crude ex-Iran now needs about 35 more VLCCs, 13 Suezmaxes and 10 Aframaxes than the 2025 average, pushing demand onto smaller vessels worldwide
Oil markets are reliving the stress of April, but the cause has changed, according to a JPMorgan research note dated October 9. Delivered crude prices have climbed back to their spring peaks and European refining margins have slipped below zero again, raising the risk that refiners cut runs. Yet the bank argues the bottleneck this time is shipping capacity rather than a lack of crude.
The squeeze traces back to September, when Middle Eastern producers stepped up shipments through the Strait of Hormuz. Flows rose from roughly 7.5 million barrels per day across July and August to about 12 million in September, pulling a growing share of the tanker fleet into the region. By September, more than four in five of the world’s very large crude carriers, the biggest class of tanker, each able to carry around 2 million barrels, were in active service, leaving very little spare capacity.
JPMorgan says the issue is not only how many ships exist but how productively they are being used. More vessels are tied up in ship-to-ship transfers, where cargo is moved between tankers at sea, a process that can occupy a ship for up to 10 days. Others are taking longer routes to avoid higher-risk waters. Both lengthen voyages and reduce the number of cargoes each tanker can complete, so more ships are needed to move the same volume of oil.
Sanctions tighten the picture further. Around 125 Iranian VLCCs, equal to roughly 13% of the global fleet, are effectively shut out of the mainstream market by US measures, with many anchored or drifting in the Gulf or off Sri Lanka and Malaysia.
The bank estimates that moving Middle Eastern crude, excluding Iran, now requires an extra 35 VLCCs, 13 mid-sized Suezmaxes and 10 smaller Aframaxes compared with the 2025 average. As the region absorbs more of the fleet, VLCC employment elsewhere has fallen by 16 vessels.
Atlantic Basin producers are adapting by switching to smaller ships, with one VLCC cargo roughly equivalent to two Suezmaxes or three Aframaxes. Outside the Middle East, Aframax employment is up by about 140 vessels, or 23%, on the 2025 average, while Suezmax employment has risen by around 50 ships, or 11%. JPMorgan concludes that what started as a regional VLCC shortage has become a broad tightening across the global tanker fleet.
What makes this episode distinct is that more crude alone would not ease it: additional exports without additional ships could deepen the strain. The pace of Hormuz flows, rates for smaller tanker classes and any shift in US pressure on Iranian shipping are likely to decide whether this second April lasts as long as the first.
This article was written by Eamonn Sheridan at investinglive.com.