Supertanker sanctions send global oil freight rates soaring

Rates for chartering Very Large Crude Carriers surged overnight after the US announcement. (Shutterstock)
Updated 28 September 2019

Supertanker sanctions send global oil freight rates soaring

  • US move to exert maximum pressure on Iran to drop its nuclear program unsettles crude trade

SINGAPORE: Key oil freight rates from the Middle East to Asia rocketed as much as 28 percent on Friday in a global oil shipping market spooked by US 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 US 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 President Donald Trump seeks to exert maximum pressure on Iran to drop nuclear programs.

As some Asian oil buyers rushed to the shipping market 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 $600,000 for each 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 — will be implemented. Industry sources said some oil buyers were holding off hiring COSCO tankers while they check with legal teams to better understand the impact of the sanctions.

“The market is fearful of sanctions so refiners are taking some preventive measures. We’ll have to see how widely implemented the sanctions will be,” said KY Lin, spokesman for Taiwanese refiner Formosa Petrochemical, a major crude oil buyer in Asia.

Friday’s jolt left shipping rates springing back to levels not seen since mid-September drone and missile strikes on key Saudi Arabian oil production facilities roiled global markets. The COSCO vessels are equal to about 7.5 percent of the world’s fleet of supertankers, according to Refinitiv data.

“Charterers are in trouble,” a North Asian shipbroker said, declining to be named citing company policy. “It was terrible news for every one of us with the Saudi drone attack, and now the market has to deal with US sanctions on COSCO.”

“Good news for owners, good time for them to earn money,” the broker said.

While diplomatic tensions between the US and Iran remain high, a British-flagged tanker that had been detained by Iran in the Strait of Hormuz on Friday left Bandar Abbas port heading for international waters.

On Thursday, Unipec, the trading arm of Asia’s largest refiner Sinopec and India’s largest refiner Indian Oil Corp, canceled bookings of some COSCO ships and scrambled to find alternative ships to move their crude on. 

“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 US crude to Asia were subject to the biggest impact. The broker declined to be identified, citing company policy.

Crude shipments from the US to Asia have also been affected. Industry sources said provisional bookings for VLCCs Cosmerry Lake and Yuan Qiu Hu to load US 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 on Friday.

“(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, parent of COSCO Shipping Tanker (Dalian).


Getting more women into leadership positions top priority: CEO

This June 23, 2018 photo, shows a general view of Riyadh, Saudi Arabia. (AP)
Updated 18 January 2020

Getting more women into leadership positions top priority: CEO

  • Saudi Arabia is focusing on the Business 20 (B20), making this one of the key engagement groups. Women in Business will be Saudi Arabia’s signature topic

RIYADH: The boss of one of Saudi Arabia’s biggest banks says that getting more women into leadership positions is a top priority.
Samba CEO Rania Nashar chairs the action council for Women in Business created by the Business Twenty (B20), which is the official G20 dialogue with the business community. It represents the global business community across all G20 member states and all economic sectors.
She said the council was set up to boost women’s particpation not only in business but also in global leadership positions.
During the launch of the B20 in Saudi Arabia this week, Nashar highlighted the under-representation of women in the economy.
“There is a gap of 27 percent between male and female workers; 75 percent of males are part of the labor force while only 48 percent of females are working,” she said.
She said it was important not to just talk about women as workers but as business owners.

FASTFACT

Saudi Arabia will host the 15th G20 Summit in Riyadh on Nov. 21-22, 2020.

“That’s why entrepreneurship is very fundamental to our task force,” she said.  “The majority of the finance development programs have incentives for giving loans to females; however, despite the fact that many large borrowers are females, the amount of loans granted to them is far below what is granted to males,” she added.
Nashar said that two-thirds of female business founders feel that they were not taken seriously by investors when they pitch for investments. They also feel that they are treated differently from their male counterparts.
Saudi Arabia will host the 15th G20 Summit in Riyadh on Nov. 21-22, 2020. The Kingdom is focusing on the Business 20 (B20), making this one of the key engagement groups. Women in Business will be Saudi Arabia’s signature topic.