There has been a significant increase in the cost of shipping oil due to the sanctions imposed on the United States of America. This unexpected rise in premiums for supertanker freight charges is a result of the US tightening sanctions on Russia’s oil industry. The decision to escalate these sanctions was made public by the United States, prompting businesspeople to quickly charter vessels to transport commodities from other countries to China and India.
China and India are currently exploring alternative sources of petroleum in order to comply with the new, stringent sanctions imposed by the United States on Russian producers and ships. These sanctions aim to block the importation of Russian petroleum in order to align with the restrictions put in place. These sanctions were imposed in response to Russia’s involvement in the crisis in Ukraine, aiming to reduce the revenue of the world’s second-largest oil exporter. Ukraine is currently at the center of this crisis, with Russia being blamed for the conflict.
In recent years, many vessels, particularly those belonging to a shadow fleet seeking to circumvent Western restrictions, have been targeted. These tankers have been deployed to deliver oil to China and India, taking advantage of the cheaper Russian supply no longer available in Europe due to Moscow’s actions in Ukraine. The vessels transporting oil from Russia are also speculated to have carried oil from Iran, a country under US sanctions.
Approximately 669 shadow fleet tankers are involved in shipping oil from countries like Russia, Venezuela, and Iran. The recent sanctions imposed by the United States now cover around 35 percent of these tankers. Lloyd’s List Intelligence was able to gather this information during an investigation. In addition to the mentioned countries, these tankers are also involved in the transportation of oil from various other countries across important routes.
As a response to this situation, Very Large Crude Carriers (VLCCs) experienced an increase in cargo prices, particularly after the largest Asian refiner, Sinopec’s trading arm Unipec, chartered multiple supertankers. The recent purchases of sweet crude cargoes from Europe and Africa by Unipec led to the price surge for VLCCs. These transactions included oil shipments from Johan Sverdrup in Norway, Sangomar in Senegal, Ghana, and Angola.
The stock market saw gains at the end of the trading day, with the S&P 500 bouncing back after reaching a two-month low following the persistence of high U.S. Treasury note interest rates. Anoop Singh, the global head of shipping research at Oil Brokerage, attributes the rise in freight costs to the need for alternative crudes to meet obligations.
Premiums for Dubai, Oman, and Murban crude oil benchmarks reached their highest levels in over a year on Tuesday, with Dubai premiums surpassing $4 per barrel. Unipec has planned the transportation of oil from the Middle East using eight tankers since Friday, with expectations of similar vessels being utilized in the future.
In conclusion, the escalating sanctions imposed by the United States have resulted in a surge in shipping costs, as nations like China and India are pushed to find alternative sources of petroleum. This has led to an increase in VLCC cargo prices and premiums for Middle East benchmarks. The impact of these sanctions is felt across the global oil industry, affecting various countries and influencing the movement of oil shipments.