Oil Supertanker Rates Are Soaring After Korean Shipper Sparks Market Frenzy
Last week, when looking at the latest global container shipping rates, we observed a surge in prices for all legacy Red Sea routes such as US and Europe to China, while simple trans-Atlantic or trans-Pacific routes remained subdued.
Here comes the next supply-driven inflation shock pic.twitter.com/2H7ppdmRVQ
— zerohedge (@zerohedge) January 5, 2024
However this surge pricing in container rates is also shifting over to tankers: as Bloomberg reports, the cost to ship crude oil from the US Gulf to China surged after a slew of vessel hires by a South Korean shipowner.
A flurry of booking activity by Sinokor Merchant Marine in the past week rapidly tightened the availability of tankers, spurring what Bloomberg said was a "market frenzy." While the transporters were booked for long-haul voyages, the motivation for the unusually large hiring spree was unclear.
At least one vessel bound for the US to China route was chartered for just shy of $10 million, compared with about $7 to $8 million last week. Surprisingly, some of the tankers were booked with no underlying cargo.
As a result of this booking spree, tanker rates have soared: the cost for VLCCs (or very-large crude carriers) from the US Gulf to Asia jumped by more than $1 million a day on Monday, the largest gain since November 2022. The vessels can haul 2 million barrels. That rippled across the world, impacting other key oil routes often served by supertankers. Rates for the benchmark Middle East to China route rose by the most since September.
“Sinokor continues to charter VLCCs in what appears to be a major punt on the VLCC freight market,” shipbroker Braemar wrote in a note. It was unclear if the Korean shipping company is hoping to corner at least a small part of the VLCC market, but one thing that's certain is that tanker shipping clients will now have no choice but to pass on the surging costs to end-users, sending oil prices higher.
The pricing spike comes amid a risk of disruption in tanker markets due to Houthi attacks on merchant vessels in the Red Sea, which has led many ships traversing the world’s oceans to take safer but longer routes, adding to their voyage length and reducing availability. Meanwhile, the volume that needs to be transported could be boosted by the allocation of bumper quotas to refineries in top importer China and near-record US exports.
Sinokor’s fleet covers a range of sectors, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. In addition to roughly 22 oil tankers, it also has bulk commodity, LNG and container transporters.