Europe will import a record amount of US crude this month, increasingly relying on larger tankers as sanctions on Russian oil upend global trade routes.
Ships carrying up to 1.84 million barrels a day will arrive from the U.S. Gulf in March, tanker tracking data compiled by Bloomberg show. Meanwhile, smaller ships are becoming expensive with more reserves to carry Russian oil for trips to Asia.
The trade boom is another byproduct of Russia’s war in Ukraine, and the sanctions the West slapped on Moscow in response. The change likely makes the fleet less efficient, thereby eroding the total supply of tankers, which carry roughly 40% of the world’s oil.
A total of 11 supertankers, known in the trade as Very Large Crude Carriers, or VLCCs, and 16 Suezmax-class vessels will arrive in Europe from the US Gulf this month. These large ships now carry about 60% of the route’s crude, compared with 37% a year ago. Supertankers can carry about 2 million barrels of oil, while Suezmaxes can carry a million.
Even smaller vessels known as Aframaxes, with a capacity of around 700,000 barrels, are typically used for the journey. This is partly because Europe has only a few ports that can handle supertankers, which are usually reserved for the longest voyages around the world.
However, Aframaxes are in short supply these days as traders book the vessels to transport increasing amounts of Russian oil to Asia. Major importers such as China and India have been picking up larger volumes as Western buyers abandoned cargoes due to sanctions on Moscow over the invasion of Ukraine.
As a result of the change, it is now relatively cheap to hire the largest vessels to transport crude from the US Gulf to Rotterdam. For a supertanker, that cost is about $2.70 per barrel of oil, according to Viktor Katona, chief crude oil analyst at Kpler Ltd. For an Aframax on the same route, it is about $8.50 per barrel.
In addition, an increasing number of US-origin Suezmaxes are arriving in Europe partially full, as this is still a cheaper option than booking one Aframax per barrel. More and more American cargo also unloads at various European ports because there are different buyers.
–With help from Julian Lee.
Photo Credit – iStock.com/Dmytro Varavin
