Tanker rates soar as US sanctions on China's COSCO rattle crude trade
30 September 2019
Tanker rates from the Gulf to East Asia soared nearly 28 per cent on Friday as sanctions imposed by the United States on units of China Ocean Shipping Company (COSCO) for alleged involvement in ferrying crude out of Iran spooked market.
Announcing the sanctions on two units of the Chinese shipping giant the US State Department called it “one of the largest sanctions actions the US has taken” since curbs were re-imposed on Iran in November last year. Two units of COSCO - COSCO Shipping Tanker (Dalian) Co Ltd and its subsidiary COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co Ltd - were named alongside other companies in alleged sanctions-busting shipments of Iranian oil.
COSCO Shipping Tanker (Dalian) owns and manages at least 36 tankers for crude and refined products, including 18 VLCCs, according to shipping sources.
US President Donald Trump targeted COSCO, one of the world’s largest energy shippers, operating more than 50 supertankers, in a move to exert maximum pressure on Iran to drop nuclear programmes.
The US action forced Asian oil buyers to secure vessels, resulting in a 19 per cent overnight surge in rates for chartering very large crude carriers (VLCCs) for October delivery. This amounts to about 75-76 points on World scale, or an increase of about $600,000 per ship, reports citing market sources said.
In fact, the rates for loading Middle East crude to west coast of India in the second week of October jumped 28 per cent to 80-92.5 points after Reliance Industries Ltd booked two VLCCs overnight, say reports.
Meanwhile, three ships linked to COSCO Shipping Tanker (Dalian) scheduled to load oil from the United States and Brazil were cancelled.
Provisional bookings for VLCCs Cosmerry Lake and Yuan Qiu Hu to load US oil in the second half of October were scrapped. The ship, owned by Cosmerry Lake Maritime Inc and managed by COSCO Shipping Tanker (Dalian), is floating off the US Gulf. Yuan Qiu Hu, owned and managed by COSCO Shipping Tanker (Dalian), is on its way to the US Gulf.
A third COSCO-linked supertanker was chartered to load in Brazil, but it has been replaced by another vessel, a source with knowledge of the matter said.
COSCO vessels account for about 7.5 percent of the world’s fleet of supertankers, according to Refinitiv data. Friday’s spike in tanker could roil oil markets once again.
On Thursday, Unipec, the trading arm of Asia’s largest refiner Sinopec and India’s largest refiner Indian Oil Corp, cancelled bookings of some COSCO ships and scrambled to find alternative ships to move their crude on.
Crude shipments from the United States to Asia have also been affected by US sanctions on COSCO tankers.
Meanwhile, India’s oil imports from Iraq surged to a record high of about 1.32 million barrels per day (bpd) in August as refiners replaced costly African imports with cheaper Basra crude.