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Oil shipping rates surge after US sanctions tighten global fleet
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Oil shipping rates surge after US sanctions tighten global fleet
Jan 13, 2025 10:09 PM

SINGAPORE (Reuters) - Supertanker freight rates jumped after the U.S. expanded sanctions on Russian oil trade and sent traders rushing to book ships to pick up supply from other countries to go to China and India, shipbrokers and traders said.

Chinese and Indian refiners are seeking alternative fuel supplies as they adapt to severe new U.S. sanctions on Russian producers and tankers designed to curb the world No. 2 oil exporter's revenue.

Many of the newly targeted vessels, part of a "shadow fleet", have been used to ship oil to India and China, which snapped up cheap Russian supply that was banned in Europe following Moscow's invasion of Ukraine. Some of the tankers have also shipped oil from Iran, which is also under sanctions.

Freight rates for Very Large Crude Carriers (VLCCs) that can carry 2 million barrels of crude across major routes jumped after Unipec, the trading arm of Asia's largest refiner Sinopec, chartered several supertankers on Friday, industry sources said.

On a daily basis, a shipbroker said, the rate on the Middle East to China route, known as TD3C, has surged 39% since Friday to $37,800, the highest since October.

Shipping rates for Russian oil shipments to China have also jumped following the sanctions.

The freight rates for Aframax-sized tankers to ship ESPO blend crude from Russia's Pacific port of Kozmino to North China more than doubled on Monday to $3.5 million as shipowners requested massive premiums due to limited tonnages available for that route, according to S&P Global Commodity Insights data.

Adding to tightness, sanctioned tankers are stranded outside China's eastern Shandong province, unable to discharge following a ban imposed by Shandong Port Group before Washington's announcement on Friday.

Analysts said tanker availability could tighten further as traders look for unsanctioned vessels to ship Russian and Iranian crude.

"We expect new ships will be pulled into the shadow fleet over the coming months, many of which will be new to this trade, tightening supply in the non-sanctioned freight market," Kpler analysts said in a note.

The rate for VLCCs from Middle East to Singapore has gained the most, up worldscale (WS) 11.15 from Friday to WS61.35, another shipbroker said. Worldscale is an industry tool to calculate freight charges.

On the Middle East to China route, freight jumped to WS59.70, up WS10.40, while the rate for VLCCs carrying West African oil to China rose WS9.55 to WS61.44, the second shipbroker said.

To ship crude from the U.S. Gulf to China, it will now cost $6.82 million, up $360,000 since last week, he said.

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