WEEKLY ENERGY RECAP: Rocketing tanker rates lead to surprise surge in US crude inventories

In this June 13, 2019 file photo, an oil tanker is on fire in the Sea of Oman. Rising tanker rates has contributed to lower US crude oil exports and surging inventories in the country for the fifth consecutive week. (AP Photo/ISNA, File)
Updated 19 October 2019

WEEKLY ENERGY RECAP: Rocketing tanker rates lead to surprise surge in US crude inventories

Brent crude trended lower to $59.42 per barrel, while WTI also retreated to $53.78 per barrel.

Weak economic data from China added to concerns about the US-Chinese trade relationship.

However, the big news of the week came from the shipping sector as tanker rates rocketed which contributed to lower US crude oil exports and surging inventories in the country for the fifth consecutive week.

The US Energy Information Administration (EIA) reported a 9.3 million barrel gain in US crude inventories for the week ended Oct. 11, which was much higher than the market expected.

Even with heavy discounts applied to US shipments, producers struggled to sell their oil because of rising tanker charter costs.

Rates for chartering a supertanker from the US Gulf Coast to Singapore were reported to have hit record highs of more than $17 million and a record $22 million to China.

This trend is also likely to be reflected in US export data for October. Adding to shipping pressures is the fact that some ships are being taken out of service to fit sulfur-reducing scrubbers ahead of the International Maritime Organization (IMO) environmental rules that are set to take effect in January 2020.

It is noteworthy that US producers export most of their oil on a cost and freight (CFR) basis where the seller is required to arrange for the carriage of oil to the final destination port. 

The expected drop in US crude oil exports as a result of spiking tanker rates shows a serious financial fragility in the US crude oil export system.

Although shipping rates for very large crude carriers hit refinery margins, saddling additional premium shipping cost on the refiners, the physical market for oil strengthened further, and trading in Arabian Gulf sour crude grades continued to pick up.

Now the US will be hoping that higher tanker rates will reduce demand for very large crude carriers, which could ease tanker rates. 

However, until then, US shale producers will likely pay more to have their oil shipped to longer-haul destinations such as the Asian market.


Dubai’s Jafza, Israeli business group sign strategic partnership

Updated 26 September 2020

Dubai’s Jafza, Israeli business group sign strategic partnership

DUBAI: Dubai’s Jebel Ali Free Zone has signed a strategic partnership with an Israeli business group to support businesses and encourage economic cooperation following the normalization of ties between the UAE and Israel.

Sultan Ahmed bin Sulayem, the group chairman and chief executive of DP World, and Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, signed the agreement virtually.

As part of the agreement, the two parties will share crucial information on new developments regarding economic relations between the countries aside from efforts to expand ties between businesses.

“The establishment of direct ties between two dynamic and advanced economies in the Middle East will undoubtedly provide impetus to economic growth, transforming the business landscape in the UAE,” bin Sulayem said in a statement.

It will be a mutually advantageous for Dubai and the Israeli business community, as more businesses will utilize the developed facilities and services in Jafza and create a bridgehead for the Israeli business sector to enhance its foreign trade in products and services,” Lynn meanwhile commented.

“Our main goal is to create a forum to promote economic cooperation and create new opportunities for businesses in both countries. Strengthening business ties and enhancing collaboration over time is also one of the primary objectives.”