(Bloomberg) -- Rates to ship oil — and tanker stocks — surged in a sign that Israel’s escalating conflict with Iran might be encouraging traders in some parts of the world to secure crude.
Earnings for so-called Aframax-class ships to deliver 700,000 barrel cargoes of US oil to Europe soared 249% this weak to reach almost $58,000 a day, according to the Baltic Exchange in London.
The ships are used on relatively short-distance international routes, meaning that they can sometimes be best-placed to satisfy the most immediate demand for barrels from refineries.
“Shipbrokers reporting a good amount of fixture activity in the mid-size crude segment out of the US Gulf market has boosted rates,” Jefferies analysts including Omar Nokta wrote in note. “Tensions in the Middle East are playing a role to an extent with cargoes booked perhaps earlier than usual.”
The Baltic Exchange’s overall assessment of Aframax earnings doubled this week to just over $42,000 a day. The next size up, Suezmaxes, have gained 56% to $36,000 this week. Very large crude carriers, the biggest class of vessel that the Baltic publishes rates for, has gained 10%.
The move for Aframaxes was spurred in part by stronger volumes from the US Gulf Coast.
That has tightened the number of available ships at a time when tanker companies, mindful of geopolitical risks emanating from the Middle East, have limited the hire of their vessels, according to three vessel owners involved in that market.
While Iran’s attack on Israel hasn’t led to any disruption of petroleum flows yet, oil prices have been rising in recent days as the risk of escalation grows.
A resumption of oil production from Libya on Thursday is another factor that’s likely to boost earnings for the smaller ships. Cargoes from north African country often sail across the Mediterranean to refiners in southern Europe.
In addition to surging vessel earnings, shares of listed tanker companies were also jumping.
Frontline Plc closed at the highest level since the middle of August in Oslo. International Seaways Inc. and DHT Holdings Inc. were both heading for their strongest settles since July.
“Owners are applying pressure to rates amid increasing geopolitical tension,” Clarksons Securities analysts including Frode Morkedal wrote in a note. “The increase is consistent with the usual seasonal uptick heading into the winter, backed by a strong underlying market with limited supply growth and increasing geopolitical risks.”
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