A Longer View

Earlier this month, the International Energy Agency (IEA) released their annual report detailing a medium-term outlook for oil markets. Oil 2025 has reiterated last year’s assertion that global oil demand will peak in 2029, only slightly changing the forecast for 2030 from 105.4 mbd to 105.5 mbd, with the trend gradually slowing and reaching contraction in 2030. Most of this growth is anticipated to take place in Asia Pacific, specifically in India, which is projected to grow by 1 mbd between 2024 and 2030, and Southeast Asia, with Indonesia leading the pack at 470 kbd. This growth is primarily made up of demand increases in petrochemical feedstocks and jet fuel. Elsewhere, the IEA sees demand growing in South and Central America and Africa by 600 and 800 kbd, respectively. Relative growth rates in Africa are projected to be the strongest globally, largely following population and GDP growth patterns. This year, global oil demand is seen at 103.8 mbd, an 800 kbd increase from 2024.

The biggest change in this year’s iteration is that Chinese demand is expected to increase by a mere 100 kbd between 2024 and 2030, a step change from last year’s report, which saw significant growth. Overall, Chinese oil demand expectations were revised downwards by 1.4 mbd in 2030. The main reasons behind this change are lower projected GDP growth and a more rapid decarbonisation of the vehicle fleet. Global demand displaced by EVs will reach over 5 mbd in 2030, with nearly half of that consisting of lower Chinese gasoline demand.

Balancing this change is a large markup in demand in the OECD, with North American demand revised up by 1 mbd and Europe by 400 kbd compared with last year, though both regions are expected to have peaked already with demand slowing more gradually throughout the decade. In contrast to China, EV penetration prospects were revised downwards for both Europe and North America, particularly in the US.

On the supply side, global oil production is forecast to rise by 3.4 mbd between 2024 and 2030, with strong growth especially in the Americas. US production is expected to rise this year and then slowly begin plateauing, with growth continuing more consistently in Canada, Guyana, Brazil, and Argentina. Strong supply growth in non-OPEC+ countries leads the IEA to expect the call on OPEC+ to decrease by 1.8 mbd by 2030, further lowering OPEC+ market share. OPEC+ on the other hand may have different ideas.

In refining, global capacity is projected to increase by 2.5 mbd between 2024 and 2030. Refining capacity additions are largely expected to take place in the East, led by China and India, at 1 mbd each, as well as 600 kbd of additions in the Middle East. Elsewhere, capacity will shrink slightly West of Suez. In terms of throughput, only 600 kbd of global growth are forecast to take place in this period, with runs increasing by 1.3 mbd in the East, and shrinking by 700 kbd in the West. Refiners will also increasingly be forced to modify their crude slates to reflect lower road fuel demand and pivot towards petrochemical feedstock as well as invest in biofuel production.

The IEA view has been challenged in recent years, with other forecasters expounding more bullish assessments and expecting oil demand to keep growing well into the next decade. However, if the IEA’s predictions come to pass, the impacts on tanker markets will be manifold. A large share of demand growth will come in the form of petrochemical feedstocks and NGLs, shifting demand towards chemical tankers and gas carriers. Further, some demand for conventional refined fuels will shift to biofuels, which provides opportunities for specialised tankers. Crude tanker markets are likely to remain supported, as growing demand East of Suez is met by growing supply West of Suez, largely in the Americas, supporting long haul trade throughout the forecast period. However, in a change from last year’s outlook, slower domestic demand declines in the West and slowing demand growth in the East somewhat moderates this effect. The outlook for the product tanker market looks more challenging, with conventional refined fuel demand easing as well as refinery capacity coming online close to demand growth centres. This could see clean tonne mile demand tested in the coming years.

Global Oil Demand (kbd)

Crude Oil

East

We witnessed a monumental week in the AG VLCC market with wild rate fluctuations. On Monday morning we were reported fixtures done east in the three digits whereas by weeks end rates were half those rates. The main cause of this was the ceasefire declared between Iran and Israel which significantly reduced tensions and risks involved in trading within the area. This was further exacerbated by a lack of enquiry for 2nd decade July and some charterers releasing ship fixed at previously high numbers. The only consolation for owners is the pace of the reduction has slowed down, and we are likely to be close to the floor. Owners are expected to show more resistance next week as they try and recover their losses. Today we are calling AG/China WS52 and AG/USG WS33.

Excitement seems to have faded for Suezmaxes in the East as rates fall lower with West runs freighting around 140 x WS45 via C/C. Rates to go East are under pressure from the VLCCs who are looking like they will be cheaper basis part cargo, for those that need a Suezmax we assess at around 130 x WS120.

In Asian Aframaxes, sentiment has softened a fair bit, but owners continue to show resistance for prompt regional enquiries that emerged. The list is tight for early July requirements and any replacement fixtures would see a momentary spike in rates, but it does look better on the back end. The market continues to work under radar as ships were clipped away privately through the week with fixtures late to surface. One would suggest that the TD14 would need another test in the coming week as rates seem that it will recorrect alike adjacent markets and other tanker segments. Stable overall but with a touch of softness on rates and we assess Indo/Oz WS125.

West Africa

Charterers appear to be holding back on VLCCs and while sentiment remains soft, we did not see the highs or lows witnessed in the AG but rather a steady decline. July has been a disappointing month as activity levels remained low, and we are in danger of tonnage build up as some owners diverted their ships away from the war zones in the Middle East. We are calling WAF/East in the region of WS52.5 today.

The early position remains tight for Suezmaxes with some potential for charterers to get caught out, although the overall sentiment is a little soft and charterers will be trying to break WS90 for a TD20 run. Rates to go East command a premium of around 10 points today.

Mediterranean

TD6 is likely there to be tested lower than last done, we assess it at around WS 102.5, there are a good number of Suezmaxes opening up in the East Med next week and we don’t foresee any real tightness in the list. Rates for Libya/Ningbo are relatively untested but feel charterers will be looking to break $4.5m.

We’ve just witnessed a bit of a yoyo effect take place for Aframaxes in the Med, where after an initial collapse, rates responded to a healthier set of fundamentals. Recapturing some of the lost value, it’s fair to say that the commencement of June’s program came at an ideal time for owners. With charterers sensing the lists were tightening they found it hard to argue where a slight increment was being asked for.  Furthermore, CPC has consistently shown resilience to negative impact (where despite fewer cargoes, the lack of CPC players in the Med acts to counter negative swings) this was evidenced again this week, trading up at WS160. Shifting focus now back to Ceyhan where liquidity is currently greater on the Aframaxes, we finish the week trading back up into the WS135-137.5 range. Although it appears once again fixing dates have reached out a bit, which may just cool proceedings for a while.

US Gulf/Latin America

VLCC rates appear to be softening in the USG after the recent recovery, but activity levels have picked up as charterers moved to cover end July stems. The reduction was likely to have been caused by bearish sentiment in adjacent zones and may stay around current levels if there is a lull before the first August stems arrive onto the market. Brazil exports had one of its quieter weeks, but rates have followed a similar trajectory to those in WAF. Today we are calling USG/China $7.7m & Brazil/China WS51.

Aframaxes continues to soften as cargoes are dripping into the market with little support from the growing position list. Limited early window cargoes will eventually make more positions become spot next week and rates will continue to dip further.

North Sea

Aframaxes in the North Sea had a bit more of a spicy start to the week with a fair bit of action and some premiums being paid for slightly more exotic fuel business. Overall, however, it returned to business as usual in the latter part of the week with little to upset the apple cart of sideways fixing and prompt units. Some have risked the ballast to the States which with guaranteed business still makes sense versus local play. Much of the same expected next week.

Crude Tanker Spot Rates (WS)

Clean Products

East

A roller coaster of a week with LR owners not extending over the previous weekend in the hope of moving rates to even higher levels on the threat of the war between Iran and Israel escalating. The ceasefire and prospect of peace took all by surprise, however, and rates have crumbled quickly from the perceived massive highs. LR1s saw TC5 drop from a peak of WS225 on the previous Friday to WS150 now and West runs having seen owners asking $4.5 million has quickly dropped to an expected $2.8m.

LR2s have seen a very similar pattern. TC1 was threatened with mid to high WS200s but has seen owners willing to pay WS175 and it’s sure to drop below the TC5 rate when really tested. West runs were being offered at $6 million but ultimately cannot be rated at more than $3.75 million now. The Yanbu/UKC run, although rated slightly differently, has fallen by nearly 30 percent which shows the direction we are going. Rates should see more stability as no doubt plenty of volume will hit the market next Monday and Tuesday now rates are back to normality (as much as it ever can be!). 

As the weeks draws to a close, we see rates in this AG MR market at a similar level to where they were pre-war. TC17 has settled in the 35 x WS220s with TC12 eventually following suit to the 35 x WS150 region. At the time of writing a handful of cargoes remain outstanding but with holidays taking place in the Middle East expect those off later dates to hold off till next week. Quiet finish expected here.

UK Continent

With any sentimental heat from the east fading (not that it had any effect on rates) the MR UKC fundamentals are the weakest they have been all year, and the rates are creaking down towards WS100. This reflects the very slow and weak state of the UKC export market. Unless there is significant fundamental cargo flow change ahead or a hurricane type event in the USG, rates are unlikely to change much. There could be a mid-term tonnage displacement factor away from the UKC which might marginally improve rates. This is due to the likelihood that owners will not want to be ballasting towards Bishops Rock, giving options away too easily for the UKC. Some owners are even considering ballasting towards the USG, but with the working window in the USG this feels like a high-risk strategy. 

A week to forget for Handies owners in the North as limited demand partnered with a healthy amount of supply via both Handies/MRs results in levels trading at 30 x WS130 for XUKC. MRs have continually added further downward pressure to the inactive Handy sector as charterers remain firmly in control here. The only real talking point this week has been the volatility in TC6 and if that market could have maintained levels, then there was potential a few ships in the North would have ballasted South. Unfortunately, freight has corrected come Friday. The weekend break will see a few more units firm up which will only add further depth to the tonnage list. Pressure on owners’ shoulders for the short term.

Med 

All sentiment and drivers have been extinguished as the Handies collapse back meaning the MRs are no longer the viable short haul backstop. The number of vessels available is outweighing demand so rates are being forced down across the board. With the North leading rates down below yearly lows the Med is likely to follow. Very bearish feeling to the market going into the weekend, the question really is how low owners are willing to go before it becomes unviable to transport oil.   

An active week in all for Handies in the Med saw rates balloon from 30 x WS135 to a high of 30 x WS220. However, with the front end of the list opening up towards the end of the week we have seen a negative correction with rates now at 30 x WS170 levels. The potential for further correction is there because charterers are presented with more options. Sentiment seems to remain spread going into the weekend. With some outstanding cargoes and a number of ships still on subs there is plenty of room for adjustment. We must wait to see what gets lifted to make a true call of what lies ahead. One point of note is that charterers might be biding their time, pre-weekend, in hope that rates soften further before new enquiry is seen.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

It’s not been the week that owners would have hoped for in terms of activity. The market saw 30 x WS257.5 fixed twice before clipping tonnage away from what was already a tight list to begin with. Soon a consensus of 30 x WS260 for next done began to emerge. These are days remained throughout the rest of the week without having cargoes there to test it. This can be explained by the overall lack of tonnage we have seen up in the North which is helping to support levels without necessarily a steady flow of enquiry. Looking to next week, we expect to see little change to rate ideas.

The Med saw a better week than its northern counterpart in terms of activity which is to be expected. Levels started with WS235 on subs out of the WMed which was a touch under where most saw the market at the end of last week. With this drop in rates, cargoes that were waiting in the wings began to flow into the market trimming up the list but keeping levels pretty steady as owners dug in their heels. EMed began to tighten up leaving owners positioned there to push for 30 x WS237.5 but whether this is repeatable remains to be seen. Heading into next week we feel the benchmark of WS235 will hold steady early on.

MR

Little activity has been seen in the North this past week as overall tonnage has been scarce. WMed ballasters made up the early positions whilst delays elsewhere pushed itineraries back just past the natural fixing window. The market needs a fresh test with ideas ranging between the 45 x WS180-185 level for the next done. The Med saw the better of full-stem enquiry this week with 45 x WS170 repeated twice keeping sentiment steady. The list has trimmed up and owners will look to improve these levels should enquiry get off to a fast start next week.

Panamax

Another quiet week for Panamaxes this side of the Atlantic as the tonnage we did see open up soon ballasted back to the USG as TD21 firms up some 20 points from WS160 toward the WS180 mark by close of play Friday. This follows a mixture of delays and replacements, giving owners the upper hand. The list is tight, and enquiry continues to flow, owners will be hoping for more of the same early next week.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)

wk on wk changeJun 26thJun 19thLast Month*FFA Q2
TD3C VLCC AG-China WS-2056765260
TD3C VLCC AG-China TCE $/day-23,25036,50059,75032,25037,250
TD20 Suezmax WAF-UKC WS090907894
TD20 Suezmax WAF-UKC TCE $/day1,75033,50031,75026,25033,250
TD25 Aframax USG-UKC WS5148143121160
TD25 Aframax USG-UKC TCE $/day3,25034,50031,25024,75034,500
TC1 LR2 AG-Japan WS-43168211134 
TC1 LR2 AG-Japan TCE $/day-14,25042,50056,75030,000
TC18 MR USG-Brazil WS82272190181173
TC18 MR USG-Brazil TCE $/day16,25039,25023,00022,75018,000
TC5 LR1 AG-Japan WS-37181218158157
TC5 LR1 AG-Japan TCE $/day-8,75032,25041,00026,00023,750
TC7 MR Singapore-EC Aus WS-4213216205189
TC7 MR Singapore-EC Aus TCE $/day025,00025,00023,50019,750

(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis

Bunker Prices ($/tonne)

wk on wk changeJun 26thJun 19thLast Month*
Rotterdam VLSFO  -41484525471
Fujairah VLSFO  -40510550506
Singapore VLSFO  -41519560507
Rotterdam LSMGO  -59665724613

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