Oil tanker freight rates hit record high due to US sanctions against Rosneft and Lukoil

Oil tanker charter rates have risen to their highest level in five years as buyers look for alternatives to Russian oil.

Bloomberg reports.

Base rates for very large crude carriers (VLCCs), which can carry up to 2 million barrels of oil from the Middle East to China, rose to nearly $137,000 per day late last week, up 576% this year. That was the highest since late April 2020 and surpassed the last multi-year high set two weeks ago.

A broader index that tracks VLCC rates on several routes also hit $116,400 per day, a new five-year high.

Orders for large tankers surged after U.S. sanctions on Russian companies Rosneft and Lukoil came into effect. This has forced buyers, especially in India and China, to turn to other suppliers.

Tanker freight rates are also rising as oil production in the United States and OPEC+ countries, including Middle Eastern producers, increases, as they prepare to supply more crude to buyers.

Bloomberg noted that the shift in demand is already evident, with more orders placed last week for late November and December, and about a dozen vessels receiving requests to transport oil from the Middle East. This, in turn, has helped boost the revenues of large tankers.