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VLCC spot charter breaks $300,000 level on market disruption

The ride in the crude oil markets continues and charter rates continue to rise unimpeded as geopolitical tensions fail to subside

Euronav and Frontline are among those raking in huge charter contracts as sanctions and security issues hit market

SPOT charter contacts for very large crude carriers broke $300,000 as the industry digested the fallout from the US focusing its spotlight on sanctions on oil and from the latest security incident in the Middle East.

The Baltic Exchange Dirty Tanker Index, which works as an aggregate of global shipbroking assessments, reported that by Friday afternoon, rates for West Africa to China VLCC routes had almost doubled within a day to reach $278,057.

Middle East Gulf to Singapore and China routes had reached $305,998 and $300,391 respectively, marking an almost 100% day-on-day increase.

VLCC rates have been rising sharply since the US imposed sanctions on units of Cosco Shipping.

On Friday, ExxonMobil chartered in the 299,946 dwt 2017-built Ardeche from Euronav for 325 points on the Worldscale, equating to a $298,208 time charter equivalent rate per day, excluding idle days, for 29.08 days, for a Middle East Gulf-Singapore route.

The spot rate for this vessel was revised from Thursday, when it was at 165 points on the Worldscale, according to Tanker International, which comprises a pool of VLCCs owned by different companies.

Separately, Idemitsu chartered in the Euronav-owned 318,438 dwt Ingrid for a trip between the Middle East Gulf to Japan for 280 points on the Worldscale, or a $301,219 TCE including idle days, for 45.41 days and $285,224 excluding idle days, for 49.76 days.

That contract also appears to have been revised up from Friday morning when it was 240 points on the World Scale.

ST Shipping also chartered in the 320,513 dwt, 2008-built Maran Capricorn from the Angelicoussis Group for a $237,228 TCE excluding idle days for almost 66 days for voyage between West Africa and China, according to TI.

Frontline chartered out its 321,300 dwt, 2009-built Front Endurance for $216,405, excluding idle days, to Stasco for almost 71 days. The vessel will move oil from the Middle East Gulf to the UK coast through the Cape of Good Hope.

Crude oil tanker rates have increased in recent weeks as US sanctions have effectively squeezed tonnage out of the market. 

The US government sanctioned some of Cosco’s tanker units in late September for importing Iranian crude oil in violation of US sanctions.

The sanctions have not just knocked out those specific vessels also contaminated those in joint ventures where Cosco has a presence.

The disruption has been augmented by recent decision form major tanker charterers Unipec and ExxonMobil to effectively shun vessels that have within the past year done any business in or with Venezuela, affecting over 200 VLCCs and suezmaxes.

Bimco chief shipping analyst Peter Sand told Lloyd’s List that as long as Asian refiners from India to Japan remain desperate for crude these high rates will continue.

He warned, however, that when that situation changes these rates will fall off a cliff.

Refiners have planned well for very high crude runs in the fourth quarter of the year and they will not be letting go of those because rates increase, he added.

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