VLCC earnings have surged to nearly $160,000 per day with strong Chinese charter demand continuing to drive up freight rates in “panic” trade.
On the Baltic Exchange, spot earnings on the Middle East Gulf-China increased by $34,558 from the day-ago level to $158,030 per day as of Thursday afternoon, not far from the all-time high.
Day Harvest, Chinese state major Sinochem’s charter arm, has reportedly put Euronav’s 297,400-dwt Heron (built 2007) under provisional booking at Worldscale 187.5 for this trade with a loading period of between 5 and 7 November.
The charterer cannot be immediately reached for comment.
The fixture came after Unipec, the trading arm of Chinese state energy giant Sinopec, had fixed five VLCCs for loading during early November at WS140 earlier this week.
“Chinese charterers are taking non-Chinese vessels, and this is making the market panic,” an Asian broker said.
“Vessels are getting covered very quickly. There is no reason for owners to do the same as last done.”
The recent rally has been prompted by the US sanctions on Cosco Shipping Tanker (Dalian) Co, one of the main subsidiaries of Cosco Shipping Energy Transportation (CSET), for allegedly transporting Iranian oil.
While state-controlled CSET, the world’s largest crude tanker owner by capacity, has been quietly marketing its vessels owned by non-sanctioned entities, some charterers are still refraining from taking its tonnage as precaution.
According to company documents issued in early October, CSET owns a total of 137 VLCCs, suezmaxes, aframaxes, panamaxes and smaller oil tankers via various subsidiaries.
Of them, Cosco Dalian and its subsidiaries owns 26 VLCCs, eight panamaxes, three suezmaxes, three aframaxes, and three handysize or smaller ships.
“Current wisdom suggests that the Cosco issue will continue while the US remains in negotiations with China (of which sanctions are becoming an increasingly important weapon) over a trade deal and as it continues to exert pressure to drive Iranian oil exports to zero,” Alphatanker said in a note.
“With this in mind, our base case is that the uncertainty around Cosco is likely to persist for at least the next six months which will stop many Cosco vessels from trading in the wider tanker pool.”
“However, we acknowledge that, if it so wished, the US administration could unsanction Cosco…at the drop of a hat.”
The bullish VLCC sentiment has been passing onto smaller segments, which are already benefiting seasonal oil demand, incremental crude runs as a result of IMO 2020, and rising crude exports from the US, Norway and Russia’s Baltic ports.
Average suezmax earnings were assessed by the Baltic Exchange at $120,887 as of Thursday afternoon, up by $9,651 from Wednesday. Aframax earnings increased by $2,218 to $55,075 per day.
“Markets are experiencing a trickle-down effect with cargos being split onto smaller vessels if these become more economic than booking VLCCs,” Alphatanker said.
“There is evidence that this is already occurring in the suezmax market and even once aframax tonnage has repositioned itself, is likely to help to support rates at levels well above their summer nadirs.”
