VLCC tanker rates surge on long-haul US Gulf demand
Quantum Commodity Intelligence – Shipping costs for the largest class of oil tankers have started 2024 with a bang, with the cost of chartering a very large crude carrier (VLCC) on US Gulf-Asia routes soaring around 20% from pre-holiday levels.
According to brokers, costs for a long-haul US Gulf to China have moved up to $10 million on a flat rate, compared to $8 million at the start of the year, increasing the per barrel cost of transit around $1/b to $5/b with a typical VLCC carrying 2 million barrels of crude.
"A busy, breathless week, mainly due to the Atlantic excitement, we are rating TD22 (USG-Ningbo) at $10 million," said Fearnleys shipbrokers, adding that $5 million had been paid on USG/UK-Continent.
A combination of longer sailing times via southern Africa as more vessel operators avoid the Red Sea, healthy US exports and a strong pull from China after a bulked-up export quota announced earlier this year.
Although VLCC shipments from the USG do not utilize the Suez Canal, the knock-on effect of vessels sailing on the longer Cape of Good Hope route has lifted chartering rates across the tanker-class range.
Arbitrage
The sharp rise in shipping crude oil from the US Gulf to Asia has crunched arbitrage economics and could lead to a drop in arb flows, although barrels from the Americas still remain competitively priced against equivalent barrels in Asia, with East-of-Suez structurally short of low sulfur grades.
However, modern refineries across Asia have grade flexibility, so more expensive shipping from the Atlantic Basin has helped boost premiums for both lower sulfur grades such as Murban, while medium sour crudes, including Oman, Upper Zakum and Al Shaheen, have all improved this week.
VLCC rates in the Middle East were also sharply higher, with Middle East Gulf-Far East quoted at Worldscale 70 (based on 2024 Worldscale rates), compared to around W55 in late December.
Meanwhile, brokers Poten & Partners have unveiled their list of the top dirty tanker spot charterers for 2023, with China's Unipec, the trading arm of refining giant Sinopec, easily retaining top spot.
According to Poten, Unipec shipped at a total of 204 million mt in the dirty tanker spot market (crude and heavy fuel oil), taking a 16.5% market share on spot volumes, which doesn't take into account own fleets and time charters.
Shell was a distant second with 50 million mt (4%) and ExxonMobil third with 47 million mt (3.8%), followed by Totalenergies, Chevron, IOC, BP, Vitol, Petrobras and PetroChina completing the top 10.
