VLCC shipping rates top $1M/day, Bahri likely to benefit

Shipping rates for Very Large Crude Carriers (VLCCs) have surged to record levels as heightened transit risks and reduced vessel availability on key Middle Eastern routes have tightened tanker supply and increased the cost of transporting crude to Asian markets.

The daily time-charter equivalent (TCE) rate for the benchmark TD3C route from the Arabian Gulf to China exceeded $1 million for the first time on Sept. 14, reaching about $1.035 million per day.

Rates continued to rise in the following days, surpassing $1.2 million per day on Sept. 18, an exceptional level compared with about $45,000 per day before the war.

Shipping reports indicated that the 2016-built VLCC Kuwait Prosperity, operated by Sinokor, was chartered by Total Singapore to transport a cargo scheduled for Sept. 22 from the Arabian Gulf to the East at a rate of WS1350, equivalent to a daily return of more than $1 million.

Baltic Exchange assessments also confirmed the sharp increase, with the TD3C rate reaching about $1.099 million per day on Sept. 15 for a 270,000-ton VLCC on a standard voyage from Ras Tanura in Saudi Arabia to Ningbo, China, compared with $1.034 million the previous day. This marked the first time the index had exceeded $1 million per day.

The surge reflects a shortage of available vessels, higher operating and insurance risks, and changes in cargo routes and longer voyage distances, all of which reduce the effective supply of vessels available to transport crude.

These developments put Bahri among the Saudi companies most directly exposed to movements in the tanker market, given its ownership of one of the world's largest VLCC fleets.

Bahri owned 49 VLCCs as of the end of Q2 2026, out of a total fleet of 107 vessels.

During the second quarter, the company added one VLCC and sold another, leaving the number of VLCCs unchanged at 49 as it continued its fleet renewal and expansion program.

The size of Bahri's fleet gives the company significant capacity to benefit from periods of higher crude tanker rates, particularly for vessels operating at market-linked rates.

A surge in freight rates

The latest surge in freight rates comes after Bahri's Q2 2026 results demonstrated the impact of higher shipping rates on its business.

Bahri's revenue rose 156% year on year to SAR 6.31 billion in Q2 2026, compared with SAR 2.46 billion in the same period a year earlier.

Net profit surged 574% to a record SAR 2.75 billion from SAR 407 million in Q2 2025.

The company attributed the strong performance mainly to its crude oil transportation segment, which benefited from a significant increase in freight rates and higher tanker chartering activity to meet rising customer demand.

Bahri also said quarterly revenue growth was significantly driven by higher VLCC freight rates and the commercial flexibility provided by chartering in vessels.

For the first half of 2026, Bahri's revenue increased 144% to SAR 11.27 billion, while net profit jumped 421% to SAR 4.90 billion, reflecting strong performance since the beginning of the year amid rising shipping rates.

The impact is also evident in Bahri's oil transportation segment.

The segment's revenue jumped to SAR 4.72 billion in Q2 2026, from SAR 1.29 billion in the same period of 2025, an increase of 266%.

The segment's net profit also rose to SAR 2.2 billion in Q2 2026, from SAR 302 million a year earlier.

The company attributed the growth to higher freight rates, increased operating days resulting from a larger average operating fleet, stronger realized returns and flexibility in commercial management.

Bahri's tanker TCE

One of the key indicators highlighting Bahri's exposure to stronger market conditions is the TCE rate achieved by its owned vessels.

The average realized TCE rose to $146,900 per day in Q2 2026, from about $54,000 per day in Q2 2025, an increase of 172%.

Operating days for owned tankers also increased to 4,435 days, from 4,012 days in Q2 2025.

These figures are particularly significant given the latest market surge in September. Bahri posted record quarterly profits in Q2 when the average TCE achieved by its tankers was still far below the current levels of more than $1 million per day on some routes.

Despite record market levels, the TD3C index exceeding $1.2 million per day does not mean every Bahri tanker earns that amount.

The figure represents the daily TCE for a specific benchmark route under exceptional market conditions, rather than a uniform rate received by all vessels. Actual revenue varies depending on the route, contract timing, type of agreement and voyage duration.

Bahri's owned vessels exposed to spot rates benefit more directly from higher market rates, as a significant portion of vessel operating costs does not increase at the same pace as freight rates.

At the same time, Bahri charters additional vessels from the market to meet customer demand, which has contributed significantly to the growth of its oil segment.

Revenue generated by chartered-in vessels accounted for around 40% of Bahri's oil segment revenue in Q2 2026.

This provides the company with flexibility to expand its business when demand rises, but also means that higher vessel charter rates represent an additional cost. Accordingly, the impact on profitability depends on the spread between the cost of chartering the vessel and the rate Bahri receives from its customer.

What does the current surge mean for Bahri?

The current market rally comes as Bahri owns a large VLCC fleet and after a quarter in which its oil transportation segment posted strong growth on the back of higher freight rates.

The company also confirmed that its entire fleet remained commercially employed during Q2, while relying on flexible vessel deployment and chartering from the market to respond to demand and changes in trade flows.

If tanker rates remain elevated in the coming period, this could provide additional support for the oil segment's results, particularly for voyages priced according to prevailing market conditions.

Another potential factor is the diversion of some tankers away from the Bab El-Mandeb route and around the Cape of Good Hope, extending voyage times and reducing the effective supply of vessels available in the market. Route changes can add 10-15 days to some voyages, while the increase exceeds 30 days for some shipments from Yanbu to Asia.

Although longer voyages increase fuel consumption and operating costs, they also increase tanker demand on a ton-mile basis and keep vessels occupied for longer periods, reducing available supply and supporting freight rates.

Therefore, the key factor for Bahri will not be the TD3C index reaching $1.2 million on any given day, but rather the duration of elevated rates, the company's exposure to the spot market, and the impact of longer voyages, chartering costs, insurance and operating risks.

Accordingly, VLCC freight rates and route developments during the remainder of Q3 will be among the key indicators to monitor when assessing Bahri's performance, following the clear sensitivity to higher freight rates already demonstrated in Q2.