Rise in Atlantic VLCC Short Hauls Supports Persian Gulf Freight Rates

The recent surge in VLCC tankers transporting crude oil on short-haul voyages as Europe pivots away from Russian imports is supporting freight rates that have been highly volatile since Russia’s invasion of Ukraine, shipping sources said.

• Platts assessed the freight cost of moving 270,000 mt of crude on the key Persian Gulf-China route up $5.79/mt month on month at $16.74/mt Feb 17, S&P Global Commodity Insights data showed.
• The assessed cost fell to $10.95/mt Jan. 16 from its 2022 high of $26.81/mt last Nov. 17, and has been on a steady recovery since.
• Changes in both crude trading routes and tanker employment patterns have caused ongoing volatility in the freight market since Russia's invasion of Ukraine last February, including an increasing share of VLCCs being employed for shorter hauls such as Trans-Atlantic trips and West Africa to Europe voyages.
• The percentage of VLCCs plying the Trans-Atlantic route jumped to 27% in January from none in 2021, according to Kpler shipping data.
• With Middle East cargo nominations for March loading dates now confirmed, VLCCs owners are expecting a further increase in loadings and more ships being fixed to move these stems.
• The shorter Trans-Atlantic and West Africa to Europe voyages are pulling VLCC tonnage away from the key Persian Gulf sector, adding to supply pressure in that region.
• "The flows have changed. Some ships are locked up in the West market now. Some modern ships, especially companies that have better presence in the West, will stay there," a VLCC broker said.