- Crude oil freight rates reached record highs amid bookings bonanza to ship Saudi oil.
- Rates are easing as charterers balk at high charges and await Saudi volume plans.
- VLCC provisional charters failed this week along with another five for Suezmax tankers.
- VLCC tanker for over $350,000 per day to ship Saudi crude oil to the U.S. Gulf.
- Rates have fallen to about $170,000 per day but remain well above average.
- VLCC rates along the Middle East to China route are $210,000 per day.
- OPEC’s supply cut agreement with Russia, Saudi Arabia planned to raise crude oil supply to 12.3 million bpd in April.
According to an article published in NASDAQ and authored by Roslan Khasawneh, crude oil freight rates reached record highs amid a bookings bonanza to ship Saudi oil to the world.
Freight reaches a new high
After a frantic week that sent crude oil freight rates to record highs amid a bookings bonanza to ship Saudi oil to the world, rates are now easing as charterers balk at the nosebleed charges and await Saudi volume plans for April, shipping sources said.
“Sentiment remained softer today,“ said one shipbroker while pointing to another day of limited chartering activity.
Charter rates slow down
At least nine very large crude oil carrier (VLCC) provisional charters failed this week along with another five for Suezmax tankers, most of which were related to Saudi crude oil loadings, shipbroker sources said.
“The markets have softened this week and the market is waiting to see what the April stems will hold,“ said Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore, referring to Saudi’s oil exports program.
A surge in tanker demand
A surge in demand to ship the flood of crude oil unleashed by Saudi Arabia and its Organization of Petroleum Exporting Countries (OPEC) peers sent freight rates soaring last week.
A surge in tanker demand to serve as floating storage for the world’s growing oil glut is also expected to keep tanker rates elevated, the sources said.
Saudi Arabia’s National Shipping firm, Bahri 4030.SE, snatched up dozens of tankers mostly for late-March crude oil loadings.
Last week Bahri booked the Sea Splendor VLCC tanker for over $350,000 per day to ship Saudi crude oil to the U.S. Gulf, a possible record for that route, according to shipbroker data.
Rates along that route have since fallen to about $170,000 per day, according to the latest shipbroking data on Wednesday, but remain well above average.
VLCC rates along the Middle East to China route also cooled, falling to about $210,000 per day on Wednesday, down from about $265,000 on Monday, the data shipbroking showed.
“If the Saudis export the numbers they are promising to again in April, then all bets are off and freight rates will continue to rise,“ said Sharma.
Customers informed about the situation
Illustrating the strains from the rising costs of shipping oil, Iraq’s Oil Marketing Company (SOMO) informed its customers it was unable to compensate them for the big jump in freight costs for crude oil heading to Europe and the Americas in April.
After the collapse of OPEC’s supply cut agreement with Russia, Saudi Arabia – the world’s top oil exporter – said it planned to raise crude oil supply to 12.3 million barrels per day (bpd) in April.
The following month, it plans to export more than 10 million bpd.
While some ships have already been booked for early April Saudi loadings, these have mainly been on an anticipatory basis, shipbrokers said.
“It’s not over yet. We have to wait and see what happens in April,“ said Sharma.
Margins affected
The soaring tanker rates are eroding refiners’ appetite for cheap crude oil.
“High freight killed the (refining) margins,“ said a source at a North Asian refiner, with the costs negating savings made from the Saudi crude oil price cuts.
“From a delivered perspective crude is still very expensive,“ said another source, adding that freight costs now account for almost a third of the crude oil’s overall costs.
Crumbling demand for refined fuels as the coronavirus pandemic sweeps across the world has also pressured refining margins, forcing processors to slow output and contemplate extensive maintenance.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: NASDAQ
