CALIFORNIA, Jan 14 (Worldcraft Logistics) - The global oil shipping market has witnessed a significant surge in freight rates following the United States’ expanded sanctions on Russia’s oil industry. This move has prompted a frantic rush among traders to secure vessels capable of transporting crude oil from alternative suppliers to key markets like China and India, according to industry sources and shipbrokers.

Impact of U.S. Sanctions on Oil Shipping

Chinese and Indian refiners are at the forefront of adapting to the sweeping sanctions targeting Russian oil producers and tankers. These measures aim to limit Russia's revenue as part of the ongoing response to its involvement in the Ukraine conflict. The sanctions have also disrupted the operations of a "shadow fleet," a network of tankers traditionally employed to evade Western restrictions.

The shadow fleet, heavily engaged in shipping Russian, Venezuelan, and Iranian crude oil, has been hit hard. Lloyd’s List Intelligence reports that approximately 35% of the 669 tankers operating in this capacity are now under sanctions from the U.S., the U.K., or the European Union.

Spike in Supertanker Freight Rates

Freight rates for Very Large Crude Carriers (VLCCs), capable of transporting 2 million barrels of crude oil, have experienced a sharp rise. On Friday, Unipec, the trading arm of Sinopec — Asia’s largest refiner — chartered multiple supertankers, intensifying the demand for shipping capacity. Additionally, Unipec secured several sweet crude cargoes from Europe and Africa, including notable volumes from Norway’s Johan Sverdrup, Senegal’s Sangomar, and Ghana’s Ten Blend.

"Refiners must seek alternative crude supplies, and this is the primary driver of the current rally in freight rates," explained Anoop Singh, Global Head of Shipping Research at Oil Brokerage.

Middle East Crude Demand Surges

The tightening supply has also spiked premiums for Middle East crude benchmarks such as Dubai, Oman, and Murban, with prices climbing to over $4 a barrel above Dubai quotes — the highest level in more than a year. Since Friday, Unipec has booked eight tankers to transport crude from the Middle East, while other Chinese buyers, including PetroChina and Rongsheng, have followed suit.

On the Middle East-to-China route, the daily freight rate has jumped 39%, reaching $37,800 — the highest since October. Similarly, rates for VLCCs carrying West African oil to China have surged, reflecting the strain on available shipping capacity.

Russian Oil Shipments Face New Hurdles

The sanctions have particularly impacted Russian oil exports. Freight rates for Aframax tankers transporting ESPO blend crude from Russia’s Kozmino port to North China more than doubled on Monday, reaching $3.5 million per voyage. Shipowners have implemented significant premiums due to limited tonnage availability for sanctioned routes.

Adding to the constraints, numerous sanctioned tankers remain stranded outside Shandong province in China, unable to discharge their cargoes due to a local ban implemented prior to the U.S. sanctions announcement. Vortexa, a leading tanker analytics firm, estimates that over 85% of Russian crude voyages into Shandong were carried out by these newly sanctioned vessels.

Tightening Supply in the Non-Sanctioned Market

Analysts warn that the availability of non-sanctioned tankers will likely tighten further. Traders are actively seeking unsanctioned vessels to transport Russian and Iranian crude, which could exacerbate supply constraints.

"We anticipate that new ships will join the shadow fleet over the coming months, many of which are new to this trade. This shift will further tighten supply in the non-sanctioned freight market," noted Kpler analysts in a recent report.

Freight Rates Continue to Climb

Shipping costs across key routes have surged:

• Middle East to Singapore: Rates increased by Worldscale (WS) 11.15 to WS61.35.

• Middle East to China: Freight rates rose WS10.40 to WS59.70.

• West Africa to China: Rates climbed WS9.55 to WS61.44.

Meanwhile, shipping crude oil from the U.S. Gulf to China now costs $6.82 million per voyage, an increase of $360,000 from the previous week.

Outlook for the Oil Shipping Market

The ripple effects of these sanctions underscore the intricate dynamics of global oil logistics. With traders scrambling to adapt to shifting supply chains and tightening vessel availability, freight rates are expected to remain elevated in the near term. As the market adjusts, stakeholders across the oil shipping industry must navigate the complexities of geopolitical developments and their impact on logistics and transportation costs.

For more updates on logistics trends and international shipping news, stay tuned to Worldcraft Logistics.