Oil prices are falling rapidly…
In the latest Bloomberg MLIV…
Charter rates for supertankers on key shipping routes from the United States and the Middle East to Asia have dipped to their lowest levels since the middle of September, because the coronavirus outbreak has started impacting oil demand in the world’s top oil importer, China, ship brokers tell Reuters.
The cost of chartering supertankers on routes to the main Asian and Chinese import hubs has now slumped to levels last seen before the U.S. slapped sanctions in September on several Chinese tanker owners for shipping Iranian oil, including units of Cosco, the ship brokers told Reuters.
After the sanctions on Cosco, the cost of chartering supertankers to carry crude oil from the Middle East to Asia soared by double digits overnight.
On Friday, the U.S. partially lifted some of the sanctions on Cosco.
Now the freight rates for supertankers, the so-called very large crude carriers (VLCCs), are down to their lowest since the middle of September 2019 as Chinese refiners grapple with weakening fuel demand at home and elsewhere in Asia.
Demand for jet fuel, gasoline, and diesel is likely to be suppressed in the coming weeks as airlines are canceling thousands of flights to and from China, and Chinese authorities are discouraging or outright banning travel in the areas most affected by the virus.
The flow of oil traveling from Latin America to China has stopped in the wake of the coronavirus outbreak, with no oil making its way from Brazil or Colombia to China in more than a week, Bloomberg reported last week.
Sinopec, the largest oil refiner in Asia, is cutting its refinery production by 600,000 bpd in February, due to decreased fuel demand amid the outbreak, while independent Chinese refiners have already cut run rates by as much as 30-50 percent and now operate at less than half of their refining capacity, sources familiar with the plans told Reuters on Monday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.