Saudi Arabia was not bluffing when it said it would focus on its crude oil market share. Extremely high rates of new tanker lease contracts confirm that a major Saudi oil wave is definitely on the way.
The rates of VLCCs rose to about $ 200,000 a day in October 2019. It emerged with a combination of events ranging from security threats to Chinese tankers to US sanctions. This time the rates of VLCCs are now rising to previous summits through leases made by the transportation arm of the oil company Saudi Aramco.
Many tanker contracts are signed to transport oil from the Middle East Gulf to the US Gulf due to the impending wave of Saudi crude oil. Saudi Arabia has its own VLCC fleet and still leases tanker from the others.
Saudi Arabian crude oil price policy are seeing westward demand. Saudi VLCCs have increased their transport of Saudi crude oil to the US Gulf, which was prevalent before shale.
This has a big impact on the VLCC supply-demand balance. Before this week, there were an average of three VLCCs moving in a month from the Middle East to the USA. In 2015 it was about 15 VLCCs in a month, prior to the shale revolution.
Having its own fleet, Saudi Arabia rarely needs a spot market for more ships. This indicates that the taps were reopened in the long-range Middle East Gulf-US oil trade.
VLCC rates have been doubling almost every day since Monday. The rate fluctuation depends on how long Saudi Arabia will continue pumping more than 12 million barrels per day. Current fixtures are close to $ 145,000 per day. It seems unlikely that the rates will be sustained above $ 100,000 a day for several months, but they may remain above the level for several weeks.