Kathmandu. US President Donald Trump’s “threatening” moves have raised the risk of global inflation.
In fact, the global oil market is undergoing significant changes. The cost of leasing the largest crude oil tankers has reached the highest level in 5 years.
According to a Bloomberg report, this increase is due to two main factors. First, the United States has imposed new sanctions on major Russian oil exporters. Second, the supply of crude oil from the Middle East and the United States has increased.
Daily freight rates for many large crude carriers (which can carry up to 2 million barrels of oil from the Middle East to China) rose to about $137,000 last week. That’s a 576 percent increase since the beginning of the year. This is the highest level since April 2020 and surpassed the multi-year peak set two weeks ago.
The broader index, which tracks oil carriers’ fares, also rose to $116,400 a day. That’s the next highest level in five years.
Trump bans
The price hike comes after US sanctions on Russian exporters Rosneft and Lukoil came into effect on Friday. Trump had recently announced a ban on these exporters. This has prompted refiners, especially in India and China, to turn to other suppliers. Omar Nocta, an analyst at Jefferies LLC, notes that more new oil is becoming available from the U.S. and OPEC-plus countries, especially Middle Eastern producers.
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This market change is also reflected in ship activity. Last week, charterers booked a significant number of ships for late November and December loadings. About 1 dozen tankers were in demand for Middle Eastern crude oil. This increased demand has boosted earnings across the tanker spectrum.
Small ships are also riding on this wave. Vortexa’s chief freight analyst Ioannis Papadimitreou said the Suezmax — which carries only half of the tanker’s oil — is being shipped to the Middle East to load cargo normally handled by larger ships. Aframax (which carries about 7 lakh barrels) has also benefited. According to Singapore-based Sentosa Ship Brokers, their fares for the Middle East trip rose to $51,000 a day last week.
How can inflation increase?
Their fares are rising as oil supplies from Russia have decreased and demand from other countries has increased. When the demand for something is high and the supply is low and its price goes up. The same is happening with ship charters.
Oil companies now have to pay more to transport it. It can also affect the price of oil. In such a situation, the price of other fuels, including petrol and diesel, may also increase. If this happens, inflation is almost certain to rise.
