As industry participants, before making further bookings, await the outcome of oil producers meeting on Thursday, supertanker freight rates have slumped after last week’s highs.
If Russia, the OPEC, and other oil producers make a decision to reduce output sharply, freight rates could drop further. Transport and storage demand for oil will be reduced due to deeper output cuts. If producers fail to reach an agreement, freight rates could jump again.
In the VLCC (very large crude carrier) market this week, the threat of a big production cut combined with lower demand has dampened sentiment. Down by nearly half from about $235,000 a day last week, the freight rates along the Middle East-China route lowered to about $125,000 per day on Wednesday.
Before Saudi Arabia pledged to unleash its vast crude supplies following the collapse of supply talks with Russia, VLCC freight rates were at about $30,000 per day at the start of March.
The prospect of a coordinated production cut has already triggered a surge in front-month crude prices despite doubts over the US role in any production cuts. Following a spike in Saudi crude oil exports and an increase in floating storage demand driven by the widening of crude’s contango structure, freight rates have surged since the beginning of March.
