- Middle East-to-China Route Hits Highest Levels Since Early 2023.
- Sanctions on Rosneft and Lukoil Spur Market Reactions.
- Indian and Chinese Refiners Seek Alternatives to Russian Crude.
Freight rates for supertankers have taken a sharp turn upward following the latest U.S. sanctions on Russia’s major oil producers. On Thursday, front-month forward freight agreements for the Middle East-to-China route jumped nearly 16%, hitting their highest point since early 2023, according to data from the Baltic Exchange. December contracts for the same route, which are serviced by very large crude carriers (VLCCs), also saw an increase of almost 13%, reports gCaptain.
Sanctions on Rosneft and Lukoil Trigger Market Reaction
This surge comes in the wake of Washington’s decision to impose sanctions on Rosneft PJSC and Lukoil PJSC, two of Russia’s largest oil companies, as part of a renewed strategy to pressure Moscow regarding its actions in Ukraine. As a result, key buyers, especially Indian and Chinese refiners, have temporarily stepped back from purchasing Russian crude.
With these refiners seeking replacements, demand for tankers shipping crude from the Middle East is expected to rise significantly. “We anticipate the rush for replacement crudes will be larger and more sustained because of the exhaustive list of Russian producers under OFAC sanctions,” said Anoop Singh, global head of shipping research at Oil Brokerage Ltd. “Of course, buyers have to react first.”
Global Oil Trade Faces New Shifts
These latest sanctions represent another escalation in the U.S.’s ongoing efforts, spanning both the Biden and Trump administrations, to dissuade Asian refiners from importing Russian oil. Despite these efforts, the trade has remained surprisingly resilient.
According to the International Energy Agency (IEA), Russia exported around 7.3 million barrels a day in August, which accounted for about 7% of global crude and refined fuels consumption. The new restrictions could potentially shift part of that supply chain, leading to greater reliance on Middle Eastern producers and tightening the global tanker market.
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Source: gCaptain
