Business Maverick: Oil Tanker Owners Pay to Move Crude in Wake of Saudi Supply Cuts

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Saudi Arabia’s oil production cuts have hit the tanker market so hard that the biggest vessels in the market are effectively subsidizing cargo deliveries on the industry’s main trade route.

Supertankers delivering 2 million-barrel cargoes of the kingdom’s oil to China are losing $736 a day for the privilege, according to data from the Baltic Exchange in London on Tuesday. While owners might, in practice, be able to mitigate such losses by ordering captains to sail the vessels slower, the reality is that some ships are losing money on Middle East-to-Asia deliveries, according to Halvor Ellefsen, a shipbroker at Fearnleys.

Traders also reported lower demand over the past few days from some buyers in Asia where refineries will soon start carrying out seasonal maintenance programs and therefore need fewer crude cargoes.While negative earnings may look illogical, owners might be tempted to operate ships at a loss because there are still costs involved in keeping a ship at anchor — so they could lose money anyway.

 

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