Global oil shipping market alarmed by fresh United States sanctions on units of Chinese giant COSCO. The punishment was due to the alleged involvement of China in ferrying crude out of Iran. As a result, key oil freight rates from the Middle East to Asia jumped nearly a fifth on Friday.
The sanction is one of the largest actions the United States has taken since curbs were re-imposed on Iran last year. Also, in claims of involvement in sanctions, two units of giant COSCO were named alongside other companies. This busted shipments of Iranian oil.
President Trump seeks to exert maximum pressure on Iran to drop nuclear programs. The surprise move affects one of the world’s largest energy shippers, operating more than 50 supertankers.
Middle East region rushed to the shipping market to secure vessels, rates for chartering supertankers, or huge crude carriers. The area does this to bring crude oil to Asia, who surged nearly 19% overnight to about 75-76 points on Worldscale.
Moreover, there was also uncertainty on the implementation over how the sanctions on the COSCO units. – COSCO Shipping Tanker Co. Ltd and its subsidiary COSCO Shipping Tanker Seaman & Ship Management Co. Ltd. Some oil buyers were holding off hiring COSCO tankers. Also, sources check with legal teams to better understand the impact of the sanctions.
Biggest crude oil buyer in Asia, Formosa Petrochemical said the market is fearful of sanctions, so refiners are taking some preventive measures. Also, they have to see how widely implemented sanctions will be.
Global Oil Ships Impact
Oil shipping rates back to levels not seen since drone and missile strikes on key Saudi Arabian oil production facilities on Friday. According to Refinitiv data, the COSCO vessels are equal to about 7.5% of the world’s fleet of supertankers.
North Asian shipbroker, declining to be named citing company policy said charterers are in trouble. The broker added that the market has to deal with U.S sanctions on COSCO. The Saudi drone attack was terrible news for everyone.
Additionally, the broker said that it is good news for owners; it’s a good time for them to earn money.
Refinitiv ship-tracking data showed a British-flagged tanker that had been detained by Iran in the Strait of Hormuz had exited Bandar Abbas port. Also, diplomatic tensions between the United States and Iran remain high.
Unipec, the trading arm of Asia’s largest refiner Sinopec canceled bookings of some COSCO ships. They find alternative ships to move their crude on.
Furthermore, ships carrying the Middle East and U.S crude to Asia were subject to the most significant impact. As a result, rates have pushed higher by these sanctions, according to a broker in Singapore.
COSCO investor, Zhang Zheng said that the company is assessing the situation and impact internally as soon as possible. So, right now, the firm doesn’t have anything to update the press.
On Thursday, trading in shares of COSCO Shipping Energy Transportation was halted after the news on sanctions. Also, the report will remain until Friday.
