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West of Suez Handysize dirty tanker freight rates hits all-time high

London — Handysize dirty tanker freight rates have maintained record highs since October due to limited tonnage availability and bad weather.

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Since October, Handysize tanker freight rates in the West of Suez market have continued to hover at record highs. The 30,000 mt route from Black-Sea to the Mediterranean was assessed Thursday at $37.12/mt, a record high for the route. The closest the market got to this assessment was on July 27, 2008, when the price reached $37.02/mt.

The sharp increase in rates in October was caused by a number of unpredictable geopolitical factors, such as the bombing of Saudi oil facilities in September, the targeting of oil tankers transiting through the Persian Gulf, and US sanctions on affiliates of Cosco Shipping, which reduced the available tonnage of VLCCs by 10%, according to estimates, with the resulting high freight rates trickling down to the lower sizes. These came against an already tense backdrop of ongoing uncertainty over US-China trade tensions, and the IMO 2020 bunker fuel restrictions and thus higher bunker costs.

"One cannot single out each market. If something happens in the Persian Gulf, the effects will spread to neighboring markets," a source said.

The combination of such factors caused most freight routes to soar, but unlike Handysize routes, rates eventually eased.

The primary reason highlighted by market participants was high demand for smaller vessels.

"One key factor is Tuapse port preventing the entry of Aframax vessels, which means fuel oil cargoes must be divided and shipped to their final destination on smaller vessels such as Handysizes," a shipbroker specializing in this market said.

"Demand has been steady since October through until now," another broker said. "In addition to Tuapse port prohibiting entry of Aframaxes, delays in the Turkish Straits limited tonnage availability and kept rates high."

"Bad weather in both the Mediterranean and Black Sea given the winter period has also contributed," the source said. "Many ports across the Mediterranean have been severely affected."