Shipping rates for large crude carriers are hampering export trade

Bloomberg/Fuel Fix:
Soaring oil-tanker costs are drying up activity in the U.S. export market as sellers are slow to lower offers and buyers are skittish, according to market participants.

Some sellers have held back from offering cargoes, while others have yet to reduce their offers enough to accommodate the rising cost of shipping oil, according to 10 market participants. Buyers are holding out for deeper discounts after sanctions on units of China’s COSCO Shipping Corp. took away tankers from the global shipping pool, they said. As a result, hardly any deals have been booked over the past few days, compared to six or seven seen in a typical day.

Benchmark rates surged to about $300,000 a day last week for shipments from the Persian Gulf to the Far East, while one supertanker was booked to carry oil from the U.S. Gulf to Asia for more than $15 million. Indian Oil Corp. said the rising costs are forcing it to cut spot purchases. Shipments to Europe on smaller tankers have increased in the first half of the month as rates for larger vessels skyrocketed, according to Vortexa Ltd.

The increased shipments to Europe may tail off as the impact of attacks last month on Saudi oil infrastructure fades, said Stefanos Kazantzis, McQuilling Services LLC‘s senior adviser for shipping and finance. “We are not seeing yet the same volumes fixed for second half October as we did for first half for U.S. crude shipments to Europe.”

U.S. sellers have the option of supplying domestic refiners who can still absorb the local shale, so there isn’t pressure to sell their cargoes overseas, said according to Andy Lipow, president of Lipow Oil Associates LLC in Houston. Companies also have the opportunity to store the barrels in abundant onshore tanks, he said, noting that storage can be obtained as cheap as 50 cents to 60 cents a barrel per month.
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Rates from the Persian gulf increased because of an attack on an Iranian supertanker.  Rates overall are going up because of new fuel requirements for all tankers.  The market is going to have to adjust to the new pricing and it appears that the US is in a better position to resist the higher rates at this point.

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