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In recent times, there has been a noticeable increase in the cost of shipping oil due to the sanctions that have been imposed on the United States of America. Shipbrokers and merchants have reported an unexpected rise in the premiums paid for supertanker freight charges. This surge can be directly attributed to the decision taken by the United States to tighten sanctions against Russia’s oil industry. The news of these stricter sanctions caused a sense of urgency among businesspeople, resulting in many chartering vessels to transport commodities from other nations to countries like China and India. The main reason behind this rush was the changing circumstances brought about by the heightened sanctions.
Facing restrictions on Russian oil supply, China and India are actively seeking alternative sources to meet their petroleum needs. The new sanctions imposed by the United States on Russian producers and ships aim to block the import of Russian petroleum, in compliance with the specified restrictions. These sanctions are a direct response to Russia’s involvement in the crisis in Ukraine, with a focus on reducing the income of the second-largest oil exporter in the world. The crisis in Ukraine has been exacerbated by Russia’s actions and is a central factor behind the sanctions.
Over the past few years, a significant number of vessels targeted by these sanctions are part of a shadow fleet operating to circumvent limitations imposed by Western nations. These tankers have been deployed to transport oil to China and India, taking advantage of the low-cost Russian oil supply that had been restricted in Europe due to Moscow’s activities in Ukraine. Both India and China have leveraged this opportunity to access Russian oil supply, while some vessels have also allegedly transported oil from Iran, another country under U.S. sanctions.
Approximately 669 shadow fleet tankers are involved in oil shipments from Russia, Venezuela, and Iran, with the United States imposing sanctions on around 35% of these tankers in recent actions. These tankers are not only engaged in transporting oil from specific countries but also operate across various other regions, as revealed by an investigation conducted by Lloyd’s List Intelligence.
The escalation of cargo prices for Very Large Crude Carriers (VLCCs), capable of transporting 2 million barrels of oil on key routes, was triggered by Unipec’s hiring of multiple supertankers, the trading arm of Sinopec, the largest refiner in Asia. In addition to their transactions, Unipec has also made significant purchases of sweet crude cargoes from Europe and Africa. This includes oil shipments from countries like Norway, Senegal, Ghana, and Angola. These transactions have contributed to the rise in shipping costs for crude oil, as highlighted by industry experts like Anoop Singh.
As the day progressed, gains were witnessed in the stock market, with the S&P 500 rebounding from a two-month low, driven by the stabilization of U.S. Treasury note interest rates and revised expectations about Federal Reserve interest rate adjustments.
The increased demand for alternative oil sources has led to a rise in freight costs, reflected in the premiums for Dubai, Oman, and Murban reaching their highest levels in over a year. The premiums for Dubai surpassed $4 per barrel, marking a significant increase over previous highs. Moreover, the Middle East crude oil benchmarks also saw an uptick during trading sessions, reflecting the overall market trends.
Unipec’s planned bookings for tanker shipments from the Middle East indicate a continued demand for oil transportation services. With eight tankers scheduled for deliveries since Friday, it is anticipated that similar vessels will be employed in the future to cater to the evolving oil supply needs of various regions across the globe.
