US sanctions hit global oil fleet as traders shun nearly 300 tankers

The missile hit on the Iranian tanker follows attacks on Saudi oil installations, which temporarily pushed up oil prices by 20 percent. (Shutterstock)
Updated 12 October 2019

US sanctions hit global oil fleet as traders shun nearly 300 tankers

  • The move has taken roughly 3 percent of the global oil tanker fleet out of the market

Nearly 300 oil tankers globally have been placed off limits as companies fear violating US sanctions against Iran and Venezuela, driving freight rates to new highs, industry sources said.

The move has taken roughly 3 percent of the global oil tanker fleet out of the market, according to industry sources and data on Refinitiv Eikon, sending rates soaring to secure tankers to ship oil, particularly to Asia.

“Freight rates are going through the roof and people are getting very nervous with the cost of shipping,” a crude oil trader in Asia said on Friday, declining to be identified as he was not authorized to talk to media.

Unipec, the trading arm of China’s Sinopec, Swiss trader Trafigura AG, oil firm Equinor ASA and Exxon Mobil Corp. are shunning 250 tankers which have carried
Venezuelan oil in the past year.

Oil companies are also avoiding 43 oil tankers owned by COSCO Shipping Tanker (Dalian) after the US last month imposed sanctions on two units of Chinese shipping giant COSCO for allegedly
transporting Iranian crude.

COSCO Dalian also owns 3 percent of the global very large crude carrier (VLCC) fleet and the absence of its ships was a key driver for supertanker freight rates which hit new highs daily over the past two weeks, traders and shipbrokers said.

HIGH LIGHTS

  • Exxon, Unipec ban 250 tankers.
  • Sanctions on COSCO Dalian put 43 oil tankers out of reach.
  • Global freight rates surge as tanker fleet dwindles.

“This is now a handicapped set of vessels which are difficult to trade,” Anoop Singh, regional head of tanker research at ship broker Braemar ACM, said, referring to the COSCO Dalian tankers.

Disruptions from the recent attacks on Saudi oil facilities and the ban on ships that called on Venezuelan ports in the past year have exacerbated tightness in the tanker market, he added. Braemar estimates another 23 VLCCs are also out of service to install emissions cleaning equipment to meet stricter global marine fuel rules from January 2020.

VLCC freight rates for key crude oil supply routes to Asia have surged since the US ratcheted up sanctions in recent months.

The Singapore Petroleum Co, wholly owned by PetroChina, has provisionally chartered VLCC Houston to load crude in the Middle East for China in early November at 205 Worldscale points, in what could be the highest rate so far in the market, a trade source who tracks the market closely said on Friday.

The rate was at W67 prior to sanctions, according to a shipbroker.


World Bank chief tells China it needs ‘vital’ reforms

Updated 51 min 53 sec ago

World Bank chief tells China it needs ‘vital’ reforms

BEIJING: World Bank chief David Malpass urged China on Thursday to further open up its economy and reduce state subsidies, echoing key demands made by the United States in protracted trade war negotiations.

Malpass made the remarks after a roundtable meeting with Chinese Premier Li Keqiang and the heads of other global institutions, including the International Monetary Fund and the World Trade Organization.

“I encouraged new reforms and liberalization,” he said.

Beijing is struggling to kickstart the economy, which expanded at its slowest pace for nearly three decades in the third quarter amid cooling global demand for its exports and a looming debt crisis at home.

Malpass said Beijing must resolve bilateral trade disputes and improve transparency in lending to avoid a sharp downturn on growth over the coming decades.

“China could improve the rule of law, allow the market to play a more decisive role in allocating resources including debt and investment, reduce subsidies for state-owned enterprises... and remove barriers to competition,” he said.

“It is hard to achieve but it is vital for reducing any inequality and building higher living standard,” Malpass said.

State-owned behemoths dominate lucrative sectors of China’s economy — including energy, aviation and telecommunications — where access to private players is restricted.

China’s trade partners have also long complained about the lack of an equal playing field and theft of intellectual property.

The country’s rubber-stamp parliament in March passed a foreign investment law that promises to address these issues, but local governments are still working on detailed rules needed to implement it.

Li said both domestic and foreign companies registered in China will be treated equally.

“They will have equal access to investment opportunities, equitable access to resources, legal protection in accordance with the law,” he said.

Beijing has also announced a timetable to open up its financial sector to foreign investors next year, as it attempts to woo outside capital to shore up an economy battered by the trade war with the United States.

China and the US have slapped tariffs on over $360 billion worth of goods in two-way trade.

Negotiators from both sides have been working toward a partial deal, but US President Donald Trump on Wednesday said Beijing has not made sufficient concessions, making him reluctant to conclude a bargain.

Economic data shows the uncertainty created by the trade spat between the world’s two biggest economies is undermining global growth.

IMF chief Kristalina Georgieva warned that implementing all the announced tariffs would cut $700 billion out of the world economy next year.

“What should be our priorities? First, to move from trade truce to trade peace,” she said.