- Persian Gulf-China Freight Rates Climb 52.9% to w65 Amid Sanctions.
- US Crackdown on Sanctioned Oil Spurs VLCC Market Rally.
- Platts Reports Highest Persian Gulf-China Rates Since May 2024.
The freight rate for the 270,000 mt Persian Gulf-China route surged to w65 on January 14, according to Platts, part of S&P Global Commodity Insights. This equates to $14.35 per metric ton for transporting crude oil from the Persian Gulf to China. Since January 2 was the first trading day of 2025, the rate has jumped 52.9% since then, from its latest base to a peak during the last week of May 2024. Overnight fixings have also shown that the same route has kept rallying, with rates at w70 so far, reports S&P Global.
Performance of Platts’ Global VLCC Index (GVI 7)
Platts Global VLCC Index (GVI 7), for weighted time charter equivalent daily earnings for VLCCs off 0.5% marine fuel, gained a lot during the period under review. Nonscrubber, non-eco VLCCs saw earnings shoot up to $41,113 per day on January 14, an improvement of 216.5 per cent. Scrubber-equipped and eco VLCCs also improved the earnings by a 123.8 per cent increase to an average $52,504 per day during the said period.
Efficacy of New Sanctions
The spiking of VLCC rates has been very much influenced by the United States’ recent clampdown on “shadow fleet” tankers that were carrying sanctioned oil from Russia and Iran. The new set of sanctions strengthened curbs on Russian crude shipments and targeted Gazprom Neft, Surgutneftegas, and a myriad of shipping-related entities. More than 180 ships, several oil traders, tanker owners, insurance companies, and energy officials were banned by the US.
These sanctions have broken the supply chain of the sanctioned oil and forced shipowners to take advantage of the growing demand for unsanctioned crude in China and India. A charterer said, “Of course, the sanctions are also a catalyst,” referring to the fact that the restrictions themselves are changing market dynamics.
Demand Shift to Unsanctioned Crude
The sanctions have led to China and India starting to substitute Russian barrels with unconstrained crude obtained elsewhere, which is boosting premiums for Middle Eastern crude and enhancing US medium sour Mars crude. On the other hand, the change in the loading window of the Persian Gulf from January to February has triggered a long-awaited rise in the demand for loading VLCC, which had been largely suppressed during 2024 due to softening oil consumption.
Increased Activity in VLCC Chartering
Since the week ending January 10, major players such as Shell, Chevron, Unipec, Formosa, PTT, Exxon, Shenghong, and BP have been actively securing VLCCs for late January and early February loading in the Persian Gulf. A charterer noted, “It started off with the Atlantic being very active, which is why some charterers struggled for a week. Now the list in the [Persian Gulf] is balanced, but it could tighten at any time since the west side is up.”
Market Uncertainty and Future Possibilities
Despite the current surge, questions linger about whether the loss of Russian crude barrels will lead to sustained benefits for the freight market. Buyers now have the flexibility to accept delivered cargo at later loading dates, which could limit owners’ ability to secure fixtures during the deferred loading windows.
A shipbroker highlighted potential shifts in the market based on future US policy changes under President-elect Donald Trump. “If US President-elect Donald Trump intensifies pressure on Iran, sanctions on Russian crude could be relaxed, opening up several possibilities this year. However, we will have to see how long this situation unfolds.”
Local Port Restrictions
To add to the complications, the US Department of Defense recently placed China COSCO Shipping Corp. Ltd. on its Sanctioned List. On January 6, Shandong Port Group, a subsidiary of the Qingdao city government, issued a statement declaring that shipping companies and vessels subject to OFAC sanctions are not allowed to dock, unload, or receive port services. These restrictions further limit the movement of sanctioned fleets in the region.
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Source: S&P Global
