According to Bloomberg, the cost of chartering supertankers on key routes to China has increased sharply in light of recent U.S. sanctions on Russia. The development highlights the broader impact of geopolitical tensions on global shipping markets.
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Daily rates for very large crude carriers (VLCCs) on the Middle East to China route surged 112% to $57,589 after sanctions were imposed on about 160 tankers transporting Russian crude, according to Baltic Exchange data. Similarly, the US Gulf to China and West Africa to China routes also increased by 102% and 90% respectively.
At the same time, Chinese refineries are urgently purchasing crude oil from the Middle East, Africa and the Americas to make up for the shortage of Russian oil. A VLCC shipped from the US Gulf to China was booked last week at US$9.5 million, significantly higher than the low of US$7 million in previous months. In addition, Indian oil companies continue to purchase Middle Eastern oil, further exacerbating the squeeze on available ship capacity.
More worryingly, tanker rates could remain high if US President-elect Donald Trump, who is due to take office later today, puts more pressure on Iran. Junjie Ting, a shipping analyst at Oil Brokerage Ltd. in Singapore, pointed out that “if Trump increases pressure on Iranian oil shipments, freight rates may remain at current levels, which is very likely to happen.”
The increased demand for VLCCs affects the cost not only of these larger vessels, but also of smaller vessels, such as Suezmax tankers that can transport around 1 million barrels. The knock-on effect is evident in global shipping markets, with SSY Shipbrokers reporting rising freight rates due to increased demand and limited supply.
Source: IndexBox Market Intelligence Platform
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