- Tanker rates soaring as OPEC opens oil taps.
- Major producers scrambled to secure vessels to ship more crude.
- Buyers took advantage of plunging oil prices.
- VLCC tanker rates along the busy Middle East Gulf to China route jumped to about $160,000-$180,000 per day.
- 13 VLCC tankers booked to load crude oil from the Middle East to Asia.
- Crude prices have fallen more than 50% from January highs.
The cost to transport oil on supertankers soared as major producers scrambled to secure vessels to ship more crude, reports Roslan Khasawneh for Reuters.
Regaining market
The cost to transport oil on supertankers soared as :
- Major producers scrambled to secure vessels to ship more crude, and
- buyers took advantage of plunging oil prices.
Doubled freight charges
The Middle East is home to the largest OPEC producers. Freight charges to ship oil in VLCCs from the Middle East, to China, nearly doubled overnight.
According to shipbroking sources, VLCC tanker rates along the busy Middle East Gulf to China route jumped to about $160,000-$180,000 per day on Thursday, up from about $70,000-$100,000 per day.
Only a month ago, the same rate was about $20,000-$30,000 per day, the sources said.
Deal on supply cuts
The uncontrolled state comes after a deal on supply cuts between the Organization of the Petroleum Exporting Countries and its allies, including Russia, collapsed.
Saudi Arabia and the United Arab Emirates both said they would ramp up supplies, hammering oil prices already weakened by the coronavirus outbreak.
VLCC tankers for crude
According to sources, at least 13 VLCC tankers were booked to load crude oil from the Middle East to Asia. Last month during the same period, just about 4 to 5 bookings a day were made.
Rejected requests
Saudi Aramco rejected at least three Asian refiners’ requests for additional April-loading crude oil despite its pledge to ramp up supplies.
Crude price drop
Crude prices have fallen more than 50% from January highs. This raises expectations that some oil could go into storage on tankers.
But according to shipping sources, increasing rates and tumbling demand for fuel due to coronavirus mean that it makes less economic sense to store the growing supply of oil on supertankers.
Unsustainable freight rates
Ship broker said that in this weak demand environment, the current freight rates become unsustainable, if they aren’t already.
Chartered supertankers
According to data and sources:
- Saudi Arabia’s National Shipping firm, Bahri, tentatively chartered up to 19 supertankers to ship crude oil to customers worldwide.
- Six of the vessels are set to take about 12 million barrels of Saudi crude to the United States.
- The bookings by Bahri are in addition to its own fleet of 42 VLCCs.
Freight rates nearly halved
In February, freight rates nearly halved as
- the spreading coronavirus hit demand for crude oil in China, the world’s top importer, and
- after the U.S. partially lifted sanctions on one unit of Chinese shipping firm COSCO.
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Source: Reuters
