(Reuters) – Oil shipping rates are soaring following a series of sanctions on a Chinese transportation giant and limitations placed on movement of Venezuelan crude oil tankers.
FILE PHOTO: A view of a VLCC supertanker in the waters off Jurong Island in Singapore, July 11, 2019. REUTERS/Edgar Su/File Photo
WHAT HAS HAPPENED TO SHIPPING RATES?
The cost of chartering a supertanker to send crude oil from one country to another is rising sharply. A South Korean importer paid more than $12 million in shipping costs for one crude shipment from the U.S. Gulf Coast. This was followed by Friday’s tentative charter of another crude vessel by Occidental Petroleum Corp (OXY.N) for $13.25 million to ship in November.
WHAT IS AFFECTING THE COST OF SHIPPING?
The United States in late September imposed sanctions on two units of China’s COSCO (600026.SS) for their alleged involvement in bringing crude oil from Iran. U.S. Gulf Coast exporters, in turn, have held back from chartering COSCO-linked vessels. COSCO operates more than 50 supertankers, the largest vessels for carrying crude oil or fuel products.
HOW IS VENEZUELA INVOLVED IN THIS?
Last week, Exxon Mobil Corp (XOM.N) banned the use of vessels linked to oil flows from Venezuela in the last year, affecting some 250 ships. Exxon is the largest U.S. oil company and a major shipper, and its move caused rates to rise further, market sources have said. The move comes several months after the United States imposed sanctions on Venezuela in an attempt to cut off the nation’s oil revenue in a bid to oust President Nicolas Maduro, who is accused of human rights violations and rigging the 2018 presidential election. Maduro calls opposition leader Juan Guaido a U.S. puppet.
DO THE ATTACKS ON SAUDI ARAMCO’S FACILITIES HAVE ANYTHING TO DO WITH THIS?
A small amount. After those attacks last month, shippers worldwide scrambled to secure cargoes for big buyers in Asia, and many of them turned to the United States. That boosted rates, though the current surge is tied more to sanctions on COSCO and Exxon’s moves.
WHAT ELSE IS CONTRIBUTING TO RISING RATES?
New maritime rules capping the amount of sulfur used in fuels for shipping have added to rising rates, because they raise the cost for shipowners who had in the past relied on “bunker fuel” – and as of Jan. 1 will have to switch to cleaner-burning marine fuel or diesel fuel.
Reporting by David Gaffen in New York; Editing by Matthew Lewis