The supertanker freight futures surged on Thursday and Friday after the U.S. sanctions against Russia’s biggest oil firms created a rush to replace Russian barrels.
The front-month supertanker contracts on the route Middle East to China, the benchmark route, jumped by 16% on Thursday, to the highest level in nearly two years, according to data from the Baltic Exchange data cited by Bloomberg.
“We anticipate the rush for replacement crudes will be larger and more sustained because of the exhaustive list of Russian producers under OFAC sanctions,” Anoop Singh, global head of shipping research at Oil Brokerage, told Bloomberg.
On Wednesday, the U.S.sanctioned the two biggest Russian oil companies, Rosneft and Lukoil, and a number of their subsidiaries, in the harshest move so far against Russia from the Trump Administration.
The fresh U.S. sanctions on Russia’s oil industry, the first direct hit at the Kremlin’s revenues of the Trump Administration frustrated by a lack of progress toward a ceasefire in Ukraine, are a major shock to refiners in India, which are already scrambling for alternatives.
Oil prices surged on Thursday after the U.S. sanctions were announced. Early on Friday oil was on track to post a weekly gain following Thursday’s 6% rally.
Supertanker rates were already rising earlier this month due to the latest tit-for-tat fees on port callings in the U.S.-China trade spat. The port fees threaten to create additional vortexes in global oil flows.
In those early days of the port fee escalation last week, the oil tanker market was in chaos as freight rates were rising on expectations of millions of U.S. dollars in additional costs per voyage, and cargoes were being delayed or canceled.
The U.S. sanctions could have a more sustained effect on global trade flows and tanker demand as buyers found themselves in a hectic search of additional supply from the Middle East, Africa, or the Americas to offset the expected plunge in Russian crude shipments.
By Tsvetana Paraskova for Oilprice.com
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