East of Suez VLCC rates jumped as the US crackdown on “shadow fleet” tankers carrying sanctioned oil from Russia and Iran prompted shipowners to seize the opportunity to capitalize on China’s and India’s demand for unsanctioned crude.
Platts, part of S&P Global Commodity Insights, assessed the freight rate for the 270,000 mt Persian Gulf-China route at w65 on Jan. 14, equivalent to $14.35 for moving 1 mt of crude oil from the Persian Gulf to China.
The rate has soared 52.9% from w42.25 on the first trading day of 2025, Jan. 2, reaching the highest level since the end of May 2024.
Platts’ Global VLCC Index (GVI 7), which tracks the weighted time-charter equivalent or daily earnings for non-scrubber, non-eco VLCCs across seven key routes using 0.5% marine fuel, leaped 216.5% since Jan. 2 to $41,113/d on Jan. 14. Meanwhile, the GVI 7 tracking scrubber-equipped and eco VLCCs climbed 123.8% during the period to $52,504/d.
A fresh package of sanctions tightened curbs against Gazprom Neft and Surgutneftegas and added more than 180 ships, dozens of oil traders, oilfield service providers, tanker owners and managers, insurance companies and energy officials to a blacklist.
Shipowners anticipate that the latest sanctions on tankers will prompt China and India to replace lost Russian barrels with regular, unsanctioned crudes from other parts of the globe.
This development has also bolstered Middle Eastern crude premiums and strengthened US medium sour Mars crude.
Additionally, the shift in the loading window from January to February in the Persian Gulf is generating a much-anticipated surge in loading demand for VLCCs, which struggled through 2024 due to lackluster oil consumption.
Since the week ended Jan. 10, several major players, including Shell, Chevron, Unipec, Formosa, PTT, Exxon, Shenghong and BP, have snapped up VLCCs for the end of January and early February loading windows from the Persian Gulf, according to market sources.
“It started off with the Atlantic being very active, which is why some charterers struggled for a week. Now the list in the [Persian Gulf] is balanced, but it could tighten at any time since the west side is up. Of course, the sanctions are also a catalyst,” a charterer said.
The sanctions are expected to prompt charterers to seek non-Russian crude, opting for supplies from other crude-producing regions such as West Africa, which could influence the freight market.
However, doubts persist about whether the loss of Russian crude oil barrels will lead to a lasting benefit for the freight market.
“Buyers currently have the flexibility to accept delivered cargo at later loading dates, and it remains unclear whether owners can afford to wait for the deferred loading window due to changes in loading dates,” a chartering executive said.
A shipbroker said if US President-elect Donald Trump intensifies pressure on Iran, sanctions on Russian crude could be relaxed, opening up several possibilities this year. “However, we will have to see how long this situation unfolds.”
Before the US initiated a crackdown on Russia’s oil and shipping industry, the US Department of Defense blacklisted China’s state shipping company, China COSCO Shipping Corp. Ltd. Additionally, a statement issued Jan. 6 by Shandong Port Group, owned by the Qingdao city government, declared that shipping companies and vessel entities on the OFAC sanctions list would be prohibited from docking, unloading at its ports and receiving any port services.
Following Platts’s assessment of the Persian Gulf-China route at w65 on Jan. 14, several overnight fixtures indicated that the same route has continued to rally to w70.
Source: Platts
