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The cost of shipping oil has been on the rise due to the sanctions imposed on the United States of America. Shipbrokers and merchants have reported an unexpected increase in the premiums paid for supertanker freight charges. This surge in premiums can be attributed to the decision made by the United States to tighten sanctions against Russia’s oil industry. As this information became public, businesses rushed to charter vessels to transport commodities from other nations to China and India.
China and India are actively seeking alternative sources of petroleum to offset the impact of the harsh sanctions imposed by the United States on Russian producers and ships. These sanctions aim to restrict the importation of petroleum from Russia and reduce the country’s income as the second-largest oil exporter globally. The ongoing crisis in Ukraine is at the center of these sanctions, with Russia being held responsible for the conflict.
In recent years, a significant number of vessels targeted by sanctions are part of a shadow fleet striving to bypass limitations imposed by Western nations. These tankers have been deployed to deliver oil to India and China, taking advantage of the low-cost Russian supply that was barred in Europe following Moscow’s invasion of Ukraine. By utilizing Russian supply, these countries are maximizing opportunities created by the situation. There are allegations that some vessels have also transported oil from Iran, a country subject to sanctions imposed by the United States.
Approximately 669 shadow fleet tankers are involved in shipping oil from Russia, Venezuela, and Iran, with around 35 percent of these tankers facing sanctions following recent actions by the United States. Lloyd’s List Intelligence conducted an investigation to gather information on these tankers’ activities. Cargo prices for Very Large Crude Carriers (VLCCs) surged after Unipec, the trading arm of Sinopec, hired multiple supertankers, leading to an increase in transportation costs for petroleum across important routes.
Traders claim that Unipec made significant purchases of sweet crude cargoes from Europe and Africa in the previous week, including shipments from Norway, Senegal, Ghana, and Angola. These transactions contributed to gains in the stock market, with the S&P 500 rebounding from a two-month low, driven by elevated interest rates on U.S. Treasury notes and investors’ revised expectations of the Federal Reserve’s interest rate policies.
Anoop Singh, the worldwide head of shipping research at Oil Brokerage, attributes the rise in freight costs to the need for finding alternate crude sources to meet obligations. He identifies this as the primary driver of the increased expenses. Premiums for Dubai, Oman, and Murban reached their highest levels in over a year, with Dubai premiums exceeding $4 per barrel, marking a significant increase. Crude oil benchmarks from the Middle East also saw an uptick during trading sessions.
Tanker bookings data reveals that Unipec has scheduled eight tankers to transport oil from the Middle East since Friday, with plans for similar vessels in the future. The shipping industry faces challenges amid geopolitical tensions and sanctions, impacting transportation costs and affecting global trade dynamics. As the situation continues to evolve, businesses and nations must adapt to changing conditions to ensure a reliable and efficient supply chain for essential commodities like oil.
