Crude shipping rates could reach a jaw-dropping $200,000 a day in 2023
- January 1, 2023: Vol. 10, Number 1

Crude shipping rates could reach a jaw-dropping $200,000 a day in 2023

by Frank Holmes

Over the past 12 months, global container shipping rates have steadily declined to their long-term averages as supply-chain snarls have receded and backups at ports have disappeared. Now, another segment of the cargo shipping industry is seeing day rates explode to record highs.

So-called dirty tankers, those that carry crude oil, are charging more than $100,000 a day for their services as international sanctions against Russia force ships — including Suezmaxes, Aframaxes and very large crude carriers — to take longer, more circuitous routes. Carriers that once made deliveries to the North Sea port of Rotterdam via the Baltic Sea are now having to sail to China, India and Turkey, which are twice or three times the distance.

All three countries have said they will continue to buy Russian oil.

The Baltic Exchange Dirty Tanker Index, which measures shipping rates on 12 international routes, rose as much as 243 percent for the 12-month period through the end of November.

So how high could rates go? According to Omar Nokta, a shipping analyst at Jefferies, they could potentially climb to between $150,000 and $200,000 a day.

We’re almost there now. The Aframax day rate to ship oil from the Black Sea to the Mediterranean hit an astronomical $145,000 per day during November, according to Compass Maritime.

The 27 countries of the European Union were scheduled to ban crude imports from Russia, the world’s number two producer, Dec. 5, and all Russian oil products by Feb. 5, 2023. This will have the effect of disrupting global trade routes further, driving up rates even more.

Europe’s imports of Russian oil are already down dramatically from the beginning of 2022, when the country invaded Ukraine. The Netherlands was the only remaining European destination for deliveries outside of the Mediterranean and Black Sea basin. To help offset the loss of Russian supply, Norway will ship a record volume of North Sea oil in January, Bloomberg reports.

Due to changes in shipping routes, demand for oil tankers is expected to surge to levels not seen in three decades, according to Clarksons Research. The U.K.-based group is forecasting that the number of ton-miles, defined as one ton of freight shipped one mile, could increase 9.5 percent in 2023. That would mark the largest annual increase since 1993.

Volumes are already at pre-pandemic levels, with very large crude carriers and Aframaxes having exceeded 2019 volumes for the first time since the second quarter of 2020.

Also supporting rates is the fact that oil carriers are replacing vessels at a historically low pace. In July, Clarksons reported that new shipbuilding orders for container vessels had surpassed those for tankers for the first time ever. Whereas the global orderbook for containerships stood at 72.5 million deadweight tonnage (a measure for how much weight a ship can carry), the orderbook for crude oil and oil product tankers was 34 million deadweight tonnage, a new record low.


Frank Holmes is CEO and CIO of U.S. Global Investors. The original and complete version of this story appeared on the U.S. Global Investors’ website. Read it here.

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