OPEC+ Warns of Soaring Shipping Costs as Hawkish Fed Voices Reemerge

Summary:

OPEC+ warns that disruptions to energy flows are driving up shipping costs, while Cleveland Fed President Beth Hammack calls for further rate hikes as inflation risks persist.

Headlines

1. Multiple Empty VLCCs Avoid the Persian Gulf, Adding to Risks to Oil Shipments Through the Strait of Hormuz

2. OPEC+ Warns That Disruptions to Energy Flows Have Pushed Shipping and Insurance Costs Above One-Third of Cargo Value

3. US Threatens to Cut Off Weapons Supply Mechanisms for Ukraine, Potentially Marking a Major Turning Point in the Russia-Ukraine Conflict

4. Zelensky: Ukraine Is Ready to Implement an Energy Ceasefire Initiative but Insists on Reciprocity

5. Fed's Hammack Calls for Further Rate Hikes as Inflation Risks Persist

6. Russia Seeks Comprehensive Peace Deal, Rejects Zelensky's Ceasefire Proposal

Detail

Multiple Empty VLCCs Avoid the Persian Gulf, Adding to Risks to Oil Shipments Through the Strait of Hormuz

As Iranian attacks escalate, a growing number of empty supertankers are turning away from the Persian Gulf. According to tanker-tracking data compiled by Bloomberg, at least 10 very large crude carriers (VLCCs), along with several Suezmax tankers, have recently stopped or turned back while approaching Fujairah in the United Arab Emirates.

Although other vessels continue to head toward the region, the withdrawal of these supertankers has renewed concerns about the continued flow of oil through the Strait of Hormuz. Attacks have been occurring almost daily around the strait, with some taking place near Fujairah itself.

OPEC+ Warns That Disruptions to Energy Flows Have Pushed Shipping and Insurance Costs Above One-Third of Cargo Value

Ministers from OPEC and non-OPEC oil-producing countries met in Riyadh, Saudi Arabia, on October 12 local time to discuss conditions in the oil market. They reaffirmed their commitment to continued coordination through mechanisms such as the Joint Ministerial Monitoring Committee (JMMC) to help maintain stability in the oil market.

OPEC+ said that safeguarding international maritime routes and ensuring the continued flow of energy supplies were essential. Participants noted that current disruptions to energy transportation had driven shipping and insurance costs to unprecedented levels, exceeding one-third of the value of the cargo involved. These disruptions are hindering the timely and efficient transportation of crude oil and refined products while adding to global inflationary pressures.

OPEC+ warned that elevated transportation costs would ultimately feed through the oil supply chain, increasing the cost burden on both oil-producing and consuming countries and weighing on global economic growth. Participants said they would continue to monitor developments and work with governments, industry bodies, and international organizations, including the International Energy Forum (IEF) and the International Energy Agency (IEA), to improve global shipping conditions.

US Threatens to Cut Off Weapons Supply Mechanisms for Ukraine, Potentially Marking a Major Turning Point in the Russia-Ukraine Conflict

European officials recently said that the United States was threatening to suspend mechanisms used to supply weapons to Ukraine in an effort to pressure Kyiv into halting long-range strikes against Russian energy infrastructure.

Over the past weekend, several European officials received phone calls from US counterparts. Washington reportedly lobbied relevant European countries and pressured Ukraine in an attempt to end Ukrainian attacks on Russian oil refineries.

The messages from the US side reportedly included threats to suspend intelligence sharing and cut off the mechanism known as the Prioritized Ukraine Requirements List (PURL). Under this arrangement, some European NATO members contribute funding to purchase US weapons for Ukraine, while the United States does not directly finance the mechanism. The White House declined to comment on these reports.

Zelensky: Ukraine Is Ready to Implement an Energy Ceasefire Initiative but Insists on Reciprocity

On October 12 local time, Ukrainian President Volodymyr Zelensky said on social media that Ukraine supported the energy ceasefire initiative but insisted that it be implemented on a reciprocal basis.

He set out a clear precondition: if Russia wants Ukraine to stop striking Russian oil refineries and oil export facilities, Moscow must halt its airstrikes against Ukraine's energy system and critical infrastructure.

Zelensky said Ukraine had repeatedly proposed an energy ceasefire in the past, adding that his latest statement did not represent a change in position. He also said Kyiv had demonstrated its willingness to honor an agreement through concrete actions. Ukraine is now awaiting details of US-Russia talks and subsequent steps from Washington. He stressed that an energy ceasefire must be implemented by both sides.

Fed's Hammack Calls for Further Rate Hikes as Inflation Risks Persist

Cleveland Fed President Beth Hammack said in a speech on Monday that monetary policy remained insufficiently restrictive despite rising Treasury yields. Inflationary pressures extend beyond the energy sector. Higher tariffs, along with increased demand for electricity and technology components driven by the construction of AI infrastructure, are also contributing to price pressures.

If inflation persists, it could become entrenched in the expectations of consumers and businesses, making it more difficult for the Federal Reserve to restore price stability. Interest rates will need to move higher to bring inflation back to the Fed's 2% target.

Hammack, a voting member of the Federal Open Market Committee (FOMC) this year, favors smaller but more frequent rate hikes. However, she remains open to the timing of the next increase and did not explicitly endorse a rate hike at this month's policy meeting.

Russia Seeks Comprehensive Peace Deal, Rejects Zelensky's Ceasefire Proposal

The Kremlin has rejected Ukrainian President Volodymyr Zelensky's proposal for a 60-day ceasefire. Zelensky wants the truce to allow Ukraine to hold a presidential election, while Russia says it is seeking a comprehensive peace agreement.

According to RIA Novosti, Kremlin spokesman Dmitry Peskov said that Russian President Vladimir Putin would be willing to order Russian forces to halt attacks on Ukraine on election day if Ukraine held a presidential election.

Russia has long called for Ukraine to hold elections, arguing that the failure to do so undermines Zelensky's legitimacy. Under Ukrainian law, elections are prohibited during wartime.

Today's Economic Calendar

10:00 (UTC+8) IMF releases its October 2026 World Economic Outlook

15:15 (UTC+8) Remarks by Fed Governor Christopher Waller

20:15 (UTC+8) US ADP Weekly Employment Change for the week ending September 26

22:00 (UTC+8) US Existing Home Sales, annualized, for September

01:00 (UTC+8) Remarks by Richmond Fed President Tom Barkin

02:30 (UTC+8) Remarks by ECB Chief Economist Philip Lane

04:00 (UTC+8) Remarks by Boston Fed President Susan Collins

TBD (UTC+8) OPEC releases its monthly oil market report

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