Oil shipping rates soar as U.S. supertanker sanctions rattle crude trade

SINGAPORE (Reuters) - Key oil freight rates from the Middle East to Asia rocketed as much as 28 percent yesterday in a global oil shipping market spooked by United States sanctions on units of Chinese giant COSCO for alleged involvement in ferrying crude out of Iran.

In what the State Department called “one of the largest sanctions actions the U.S. has taken” since curbs were re-imposed on Iran in November last year, two units of COSCO were named alongside other companies in claims of involvement in sanctions-busting shipments of Iranian oil.
The surprise move, affecting one of the world’s largest energy shippers, operating more than 50 supertankers, comes as U.S. President Donald Trump seeks to exert maximum pressure on Iran to drop nuclear programmes.

As some Asian oil buyers rushed to secure vessels, rates for chartering supertankers, or very large crude carriers (VLCCs), to load crude oil from the Middle East to north Asia in October surged nearly 19 percent overnight to about 75-76 points on Worldscale, an industry tool used to calculate freight charges, shipping and industry sources said.
That means an increase of about US$600,000 per ship, a Singapore-based crude oil trader said.
The rates for loading Middle East crude to west coast India in the second week of October jumped 28 percent to 80-92.5 points after Reliance Industries Ltd booked two supertankers overnight, industry sources said.

But there was also uncertainty over how widely the sanctions on the COSCO units - COSCO Shipping Tanker (Dalian) Co, Ltd and its subsidiary COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co, Ltd - will be implemented.

COSCO Shipping Tanker (Dalian) owns and manages at least 36 tankers for crude and refined products, including 18 VLCCs, according to shipping sources and Refinitiv data.
At least three ships linked to COSCO Shipping Tanker (Dalian) scheduled to load oil from the United States and Brazil were canceled, oil and shipping sources said.
“There’s confusion in the market for those who has fixed the COSCO’s vessels. Everyone wants to avoid exposure to U.S. sanctions,” a Singapore-based trader said.

“Rates have definitely been pushed higher by these sanctions,” said an executive at a top shipbroker in Singapore, adding that ships carrying Middle East and U.S. crude to Asia were subject to the biggest impact. The broker declined to be identified, citing company policy.

Crude shipments from the United States to Asia have also been affected. Industry sources said provisional bookings for VLCCs Cosmerry Lake and Yuan Qiu Hu to load U.S. oil in the second half of October had been scrapped. Cosmerry Lake is owned by Cosmerry Lake Maritime Inc and managed by Cosco Shipping Tanker (Dalian), while Yuan Qiu Hu is owned and managed by Cosco Shipping Tanker (Dalian).COSCO officials were tight-lipped yesterday.

“(The) company is assessing the situation and impact internally as soon as possible, but so far we don’t have anything to update you,” said Zhang Zheng, an investor relations official with COSCO Shipping Energy Transportation (1138.HK), parent of COSCO Shipping Tanker (Dalian) Co, Ltd.