29 Mar 2024
Tuesday 9 October 2018 - 18:04
Story Code : 322641

Oil tanker rates surge as Iran rivals look to be boosting supply

Bloomberg | : The oil tanker market is surging amid signs that impending U.S. sanctions against Iran are prompting rival producers in the Middle East to ramp up shipments.

Rates to haul 2-million-barrel cargoes to Asia jumped to $40,275 in the week ended Oct. 5, more than doubling from late September, according to data from Clarkson Research Services Ltd., a unit of the worlds biggest shipbroker. Asia is sourcing more crude from the U.S. and West Africa, increasing the length of journeys, according to researcher Petromatrix GmbH.

Crude demand from Asia increases from October and will peak in the next two months, Olivier Jakob, managing director at Petromatrix, said by phone. Thats why we expect October chartering activity will be higher than September.

It's a Long Way to Ship a Barrel



For Asian buyers, replacing Iranian crude with barrels from the U.S. or West Africa extends distances and shipping times




Source: Bloomberg


Note: Departure ports are Kharg, Iran; Ju'aymah, Saudi Arabia; Malongo, Angola; Bonny, Nigeria; LOOP, U.S. Note: Destination ports are Vadinar, India and Ningbo, China





The Persian Gulf is by far the worlds biggest crude-exporting region and is home to rivals Saudi Arabia and Iran. Saudi Arabia is already pumping enough to make up for the loss in Iranian supply due to U.S. sanctions and can produce more if needed, Saudi Crown Prince Mohammed Bin Salman said in aninterviewlast week.

Strong Demand

Asian buyers are also sourcing more from the U.S. and West Africa, thats also helping ton/mile calculations and reducing the availability of tankers, Jakob said.

A total of 78 supertankers were booked on the Middle East spot market in the first week of October, compared with 136 in all of September, according to data from shipbroker Galbraiths Ltd. Vessels are normally booked about three weeks in advance, with a voyage to Asia from the Middle East taking several weeks.

Crude traded near the highest in four years this month as concern about supply losses from Iran and Venezuela outweighed the risk that thetrade warbetween China and the U.S. would curb demand. China is set toboost imports from West Africathis month to the highest in seven years as a result of the trade spat, according to tanker-tracking data compiled by Bloomberg.

The spike in rates was driven by record vessel demand in the Middle East, coupled with a built-up momentum in West Africa that led to a sharp decline in the VLCC availability in the Arabian Gulf, Morgan Stanley analyst Fotis Giannakoulis said in a research note dated Oct. 7. West Africa chartering activity isstrongas key Asian buyers have started to look elsewhere to replace the Iranian volume, further reducing available tonnage in the Middle East.

With assistance by Brian Wingfield, and Alaric Nightingale
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