Global Sanctions Tighten Grip, Trigger Surge in Oil Shipping Rates

Oil shipping rates have spiked due to U.S. sanctions on Russia and rising demand from Asia. Shell and other major entities are booking large carriers, driving up costs. The increase impacts rates across various routes, including Middle East to Asia and U.S. Gulf to China. Sanctions affect both crude and clean product tankers.

Oil shipping rates are on the rise, driven by U.S. sanctions against Russia and a significant demand from Asian traders for Middle Eastern crude. Shell and China's Shenghong Petrochemical have booked large carriers at increased rates, heralding a surge in global freight costs.

The Worldscale index—a standard for calculating freight charges—has seen notable hikes. For instance, Chinese Unipec's booking spree of tankers from the Middle East to China pushed rates to WS70.45, an increase that equates to a 15% spike, elevating charter costs to $4.1 million.

Freight rates across various routes, including those from West Africa to China and U.S. Gulf to China, have similarly escalated. With additional sanctions, demand for long-range tankers may rise, although opinions differ on the long-term impact. Asian refiners are feeling the squeeze on their profit margins due to the higher transportation costs.

(With inputs from agencies.)