Tanker Ships Sail after U.S. Allows COSCO Unit to Wind Down Oil Deals
Tanker ships are on their way to Asia with U.S. oil cargoes after Washington gave temporary approval to wind down transactions. The transactions are with a Chinese shipping firm that it sanctioned last month.
One of the most significant actions taken by the U.S. government since its repression on Iranian oil exports Washington announced sanctions on Chinese tanker firms. It includes the COSCO Shipping Tanker (Dalian). It is a subsidiary of China’s state-owned shipping group COSCO.
The sudden move by Washington and worry over shippers falling offensive to U.S. sanctions led to oil freight costs striking record highs around the world. Also, it added millions of dollars in expenses for every voyage.
Washington began to grant temporary waivers for the outcome of shipments around Oct. 15.
Refinitiv data showed three tankers carrying millions of barrels of oil owned by the designated COSCO subsidiary. The tankers set sail from the U.S. Gulf for terminals in Asia, after waiting in the area for several weeks after the sanction was imposed.
In addition, COSCO tankers were preparing to sail with cargoes onboard that had been held up.
It followed a notice from the U.S. Treasury, which allowed for the maintenance of transactions, including offloading non-Iranian crude oil.
Moreover, ships with cargoes on board were more comfortable to discharge their cargoes.
Earlier this month, a separate tanker owned by the COSCO subsidiary received a waiver from U.S. sanctions allowing it to offload its cargo.
CNOOC said it would be affected by U.S. sanctions on COSCO’s subsidiary. Contrarily, there would be no impact on its oil and gas production.
Tanker Ships Rate Fall as Charterers Take Non-Sanctioned COSCO Fleet
After almost a month, charterers outside China are ready to use ships of COSCO Shipping that are not under sanctions. This is important since COSCO’s Dalian subsidiary does not guard at least 20 Chinese VLCCs. Also, this is where the U.S. sanctions set, and that can be used for sailing cargoes.
At least one VLCC, guarded by COSCO China Shipping, is being chartered by a non-Chinese firm. COSCO was unavailable for comment about it.
COSCO Shipping firm’s two LR1s, not hit of sanctions, are also available for charter. The market not limited to VLCCs, but in recent weeks’ owners were not willing to release data on their position list.
Furthermore, China’s COSCO Shipping controls nearly 5% of the global VLCC fleet, but not more than half of it is under sanctions. This means that supply was more than earlier estimates.
This is pulling down rates from their high levels reached earlier this month.
The VLCC value for the benchmark Persian Gulf-China route deliberated at w101. It is less than half of the w330 peak reached on Oct. 14, S&P Global Platts data showed.
Market participants said that freight values on this route may slide below the main psychological mark of w100 anytime now.
Also, market participants estimate that more than 40 VLCCS are available for loading in the Middle East before Nov. 10. This includes those who lack full regulatory approvals due to age and maintenance reasons.