US sanctions hit global oil fleet as traders shun nearly 300 tankers

The missile hit on the Iranian tanker follows attacks on Saudi oil installations, which temporarily pushed up oil prices by 20 percent. (Shutterstock)
Updated 12 October 2019

US sanctions hit global oil fleet as traders shun nearly 300 tankers

  • The move has taken roughly 3 percent of the global oil tanker fleet out of the market

Nearly 300 oil tankers globally have been placed off limits as companies fear violating US sanctions against Iran and Venezuela, driving freight rates to new highs, industry sources said.

The move has taken roughly 3 percent of the global oil tanker fleet out of the market, according to industry sources and data on Refinitiv Eikon, sending rates soaring to secure tankers to ship oil, particularly to Asia.

“Freight rates are going through the roof and people are getting very nervous with the cost of shipping,” a crude oil trader in Asia said on Friday, declining to be identified as he was not authorized to talk to media.

Unipec, the trading arm of China’s Sinopec, Swiss trader Trafigura AG, oil firm Equinor ASA and Exxon Mobil Corp. are shunning 250 tankers which have carried
Venezuelan oil in the past year.

Oil companies are also avoiding 43 oil tankers owned by COSCO Shipping Tanker (Dalian) after the US last month imposed sanctions on two units of Chinese shipping giant COSCO for allegedly
transporting Iranian crude.

COSCO Dalian also owns 3 percent of the global very large crude carrier (VLCC) fleet and the absence of its ships was a key driver for supertanker freight rates which hit new highs daily over the past two weeks, traders and shipbrokers said.

HIGH LIGHTS

  • Exxon, Unipec ban 250 tankers.
  • Sanctions on COSCO Dalian put 43 oil tankers out of reach.
  • Global freight rates surge as tanker fleet dwindles.

“This is now a handicapped set of vessels which are difficult to trade,” Anoop Singh, regional head of tanker research at ship broker Braemar ACM, said, referring to the COSCO Dalian tankers.

Disruptions from the recent attacks on Saudi oil facilities and the ban on ships that called on Venezuelan ports in the past year have exacerbated tightness in the tanker market, he added. Braemar estimates another 23 VLCCs are also out of service to install emissions cleaning equipment to meet stricter global marine fuel rules from January 2020.

VLCC freight rates for key crude oil supply routes to Asia have surged since the US ratcheted up sanctions in recent months.

The Singapore Petroleum Co, wholly owned by PetroChina, has provisionally chartered VLCC Houston to load crude in the Middle East for China in early November at 205 Worldscale points, in what could be the highest rate so far in the market, a trade source who tracks the market closely said on Friday.

The rate was at W67 prior to sanctions, according to a shipbroker.

Related


US-China trade deal gets tepid reception

Updated 28 min 8 sec ago

US-China trade deal gets tepid reception

  • The US Trade Representative office said they expect to sign the phase one agreement in the first week of January
  • US farmers and retailers welcomed the end to the dispute, but also wanted to see more information

WASHINGTON: US officials announced a truce in the trade war with China with much fanfare, but economists and trade experts call it largely a victory for Beijing.
After a dispute that raged for close to two years, with several fumbled efforts at a resolution, the US agreed to cancel planned tariffs and rollback others immediately, without a similar commitment from China to lift tariffs it imposed on the US.
“Pardon me if I don’t pop champagne, but aside from a cessation of continued escalation, there is not much worth cheering,” leading China expert Scott Kennedy said in an analysis of the agreement.
“The costs have been substantial and far reaching, the benefits narrow and ephemeral.”
The US Trade Representative office said they expect to sign the phase one agreement in the first week of January, and issued a fact sheet highlighting key points, including enforcement provisions and improved protection for American technology.
In addition, it includes a Chinese commitment to buy $200 billion more in US goods and services over two years, USTR said.
That would be a significant increase: China imported just shy of $190 billion in goods and services in 2017, so if the target is met it would cut the US trade deficit with China by a third.
President Donald Trump has long railed against the trade imbalance, citing it as proof China is using distorting policies to gain an unfair advantage.
Trump tweeted that Beijing “agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more.”
Alliance for American Manufacturing President Scott Paul said agreeing to remove tariffs amounted to “giving away much of our leverage, while kicking the can down the road on the most meaningful trade issues with China.”
And trade economist Mary Lovely said the deal could only be viewed as a “partial win” which “didn’t move the needle very much.”
“We were kind of on a brink, and we saw the negotiators reach a deal that pulled us back, and I think that is important,” she said of the news Trump canceled the 15 percent tariffs on electronics that were due to hit Sunday.
But the gains in the deal do not compensate for the damage to US farmers and businesses, she told reporters.
“President Trump is desperately trying to get back to where the economy was 18 months ago,” before taking this “unilateral, brute force approach,” Lovely said.
But Kennedy said that in exchange for “only limited concessions, China has been able to preserve its mercantilist economic system and continue its discriminatory industrial policies at the expense of China’s trading partners and the global economy.”
US farmers and retailers welcomed the end to the dispute, but also wanted to see more information.
American Farm Bureau Federation President Zippy Duvall noted that prior to the eruption of hostilities China was the second-largest market for US agricultural products, but dropped to fifth.
“Reopening the door to trade with China and others is key to helping farmers and ranchers get back on their feet,” Duvall said in a statement.
In addition to the collapse in exports, and surge in farm bankruptcies, the US government has paid tens of billions of dollars in aid to farmers to compensate for lost sales — funds that come from tariffs paid by US consumers and businesses.
The National Retail Federation, which has long opposed US tariffs, particularly the last two rounds which hit consumer products in particular, said “the trade war won’t be over until they are eliminated completely.”