High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Devika Krishna Kumar and Jonathan Saul NEW YORK/LONDON, March 11 (Reuters) – Saudi Arabia’s national shipping firm, Bahri, has provisionally chartered up to 19 supertankers this week, with six set to take about 12 million barrels of Saudi crude to the United States, according to data and sources, as Riyadh ramps up shipments amid a price war with Russia.
Saudi’s state oil giant Aramco said on Tuesday it would boost oil supplies to a record 12.3 million barrels per day (bpd) in April, or 300,000 bpd above its maximum production capacity.
Bahri’s efforts to book tankers has driven market activity over the past two days, shipping sources said, helping send freight rates for supertankers or Very Large Crude Carriers (VLCCs) surging.
The shipments to the United States would mark a sharp increase from recent years, when Saudi Arabia reduced output in tandem with other top producers to prop up prices and the United States increased its own shale production to record levels.
But on Saturday Saudi slashed prices for its crude to customers worldwide after OPEC failed to reach an agreement with the world’s No. 2 oil producer, Russia to deepen production cuts aimed at shoring up prices.
“The discount now priced into Saudi Arabian crude has seen more bookings going West, and it has been a very long time since we have seen Bahri itself (and its predecessor Vela) book VLCCs to carry Saudi crude to the USG (U.S. Gulf Coast), which was a common occurrence prior to the shale revolution,” broker Clarksons Platou Securities said in a note.
“The taps are opening again on the long-haul MEG-USG trade and that Saudi Arabia, now looking to export above its max production capacity, is likely to need more ships to cater to its own transportation.”
Over the past four weeks, shipments of Saudi crude to the United States have averaged 431,000 barrels per day (bpd), according to the U.S. Energy Information Administration on Wednesday. (Reporting by Devika Krishna Kumar in New York, Jonathan Saul and Ron Bousso in London; Editing by Sandra Maler and Alison Williams)(c) Copyright Thomson Reuters 2019.
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