NeonHorizon

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“US Sanctions Spark Oil Shipping Rate Surge Amid Global Maritime Disruptions”

Written by

Oleksandr Kaiukov

in

Introduction

The maritime industry is witnessing significant shifts in Oil Shipping dynamics following the expansion of US Sanctions on Russia. The latest developments have sent ripple effects through global freight markets, particularly impacting China and India, as they scramble to secure alternative fuel supplies. This post explores the implications of these sanctions on freight rates, the deployment of the shadow fleet, and the broader impact on the maritime sector.

The Impact of US Sanctions on Russian Oil

The US has intensified sanctions on Russia’s oil industry, targeting key producers and tankers to limit Russia’s export revenue due to its conflict in Ukraine. This move has disrupted the global oil supply chain, as Russian oil, including the ESPO Blend from the port of Kozmino, has been a significant source for Asian refiners.

Surge in Freight Rates

One of the most immediate effects of the sanctions has been a sharp increase in freight rates for Supertankers and VLCCs. Key players in the market, such as Unipec, the trading arm of Sinopec, have chartered multiple supertankers to secure oil from alternative sources. This increased demand has driven up freight rates across major routes:

  • The rate for VLCCs from the Middle East to China (TD3C) surged by 39% to $37,800 per day.
  • Freight rates for Aframax tankers shipping Russian ESPO blend to North China more than doubled to $3.5 million.
  • The rate for VLCCs from the Middle East to Singapore increased by Worldscale (WS) 11.15 to WS61.35.
  • Shipping crude from the U.S. Gulf to China now costs $6.82 million per voyage, up $360,000 from the previous week.

The Shadow Fleet Dilemma

The sanctions have also exposed the operations of the so-called shadow fleet, a group of tankers used to circumvent Western restrictions. According to Lloyd’s List Intelligence, about 35% of these vessels, involved in shipping oil from Russia, Venezuela, and Iran, have been hit by sanctions. This has led to a scramble for unsanctioned vessels, further tightening the available tanker supply.

Alternative Oil Sources

Chinese and Indian refiners are actively seeking alternative oil supplies to replace the sanctioned Russian oil. Unipec, for instance, has recently purchased several sweet crude cargoes from Europe and Africa, including:

  • 2 million barrels of Norwegian Johan Sverdrup
  • 1 million barrels of Senegal’s Sangomar crude
  • Ghana’s Ten Blend
  • Angolan Djeno

Regional Market Trends

The shift in oil supply has also influenced regional market dynamics. Middle East crude benchmarks have rallied, with premiums for Dubai, Oman, and Murban crudes rising towards $4 a barrel to Dubai quotes. Chinese buyers, including Petrochina and Rongsheng, have fixed tankers to transport Middle East crude, adding to the increased demand for tankers.

Conclusion

The expansion of US sanctions on Russia’s oil industry has triggered a chain reaction in the maritime sector, driving up freight rates and reshaping oil supply chains. As China and India adapt to these changes, the demand for alternative oil sources and unsanctioned tankers is likely to grow. The maritime industry must navigate these challenges carefully to ensure the continuity of global oil supply.

Sources:

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