Choosing a side

Throughout the war in Ukraine, key buyers of Russian commodities such as India, China, Turkey and Brazil have managed to walk a tightrope between the US, EU and Russia. These countries have benefitted from discounted Russian energy and undisrupted trade to the US and EU over the past three years. However, now that dynamic is changing. The EU recently finalised its 18th sanctions package, which subject to final details, will bar the import of refined products made from Russian oil from 2026 onwards and now President Trump is also upping the pressure.

Two weeks ago, Trump appeared to change his stance towards his old “friend” Vladimir Putin, signalling that the Trump-Putin bromance might endure the same fate as Elon Musk. Initially he gave Putin 50 days to reach a deal to end the war, cutting it to just 10 days earlier this week. If Trump follows through, then by the 8th of August (1 week from now), Russian oil exports could start to come under heavy pressure. Reuters reported yesterday that state owned Indian refiners were already taking steps to reduce their Russian intake.

As is often the case, specific details are lacking but the strategy to pressure Russian exports lower appears to be focused on the use of “secondary tariffs”. Such tariffs would involve placing levies on exports to the US from buyers of Russian oil. In theory, this would mean that if India, China, Turkey and Brazil (among others) continued to buy Russian barrels, they would face 100% tariffs on trade to the US, forcing these countries to choose between the US and Russia. How this would be enforced and what exceptions might be remains to be seen, but in theory it could create significant upheaval in both Russian and mainstream oil trade. 

The value of goods exported from China, India, Brazil and Turkey to the United States far outweighs the value exported to Russia, meaning that if Trump really does impose such secondary tariffs, these countries might be forced to at least partially appease the US. Nevertheless, it remains difficult to envisage China bowing to US pressure and reducing Russian imports significantly. Buyers and sellers are likely to find ways to circumvent the new rules and may increasingly go dark with their trading practices to ensure cargoes find a way to the market.

India, which also remains bogged down in trade negotiations with the US, is possibly the biggest swing factor for the crude tanker market. With EU plans to ban imports of products refined from Russian oil from January and the recent sanctioning of a Nayara Energy, the country’s refiners were already having to reconsider their crude procurement strategy. Now, with US pressure also ramping up, refiners could soon be forced to return to alternative markets in West Africa, the Americas and Middle East; all of which would benefit mainstream tanker owners. Turkey, which also faces similar challenges and given its interdependence on the EU and trade with the US, would also likely be forced to side with the West. Brazil, and other smaller importers of Russian clean products might have more flexibility but will still be wary of upsetting the US President, particularly when it comes to companies with an international presence.

Given the scale of Russian exports, the diversity of buyers on the products side and strong footholds gained in China and India, it is difficult to envisage a collapse in Russian exports to these countries. However, if Trump is committed to ending the war and follows through on his “secondary” tariff plan, then renewed volatility in the tanker market can be expected until a new status quo is found.

Key Russian Trading Partners – exports to Russia vs. USA ($bn)

Crude Oil

East

The VLCC AG market saw a slow start to the week, with freight levels remaining under pressure and charterers had options when they came to the market as the tonnage list was well populated. Despite the limited number of enquiries on the surface, private deals helped to chip away at availability. Midweek brought a slight uptick in sentiment following a market cargo that improved rates marginally. As we moved into the later part of the week activity had improved and was now moving at a steady pace. If inquiry continues to come the feeling is that an uptick will soon be on the horizon by early next week. Today we are calling AG/China in the region in WS45.

The Suezmax markets in the East have been relatively active this week, and the general sentiment is pretty optimistic, expect Owners to be looking to push over 140 x WS47.5 via C/C for West. Rates to head East are also firm and will likely push above 130 x WS100 next week.

In Asia, the Aframax market saw little encouragement this week, with most participants likely writing it off due to sluggish demand. Earnings have slipped to just above $20k/day — down roughly 25% over the past month. A healthy tonnage list continues to weigh on sentiment, with rates correcting downwards despite several private fixtures concluded off market. Owners are finding some consolation in the firming West, which could help absorb the softness in Asia and potentially attract some players to ballast on spec. For now, charterers remain firmly in control of rates, and attention is focused on second-decade demand to see if any meaningful momentum can be regained. We round off the week assessing Indo/Oz at 80 x WS107.5.

West Africa

VLCC activity in West Africa picked up toward the end of the week, though freight levels have yet to reflect any gains. While early-week enquiry was on the slower side, sentiment had a boost once some charterers stepped in off the end August window. Owners have shown resistance to charterers’ ideas, and now with the AG market poised there is optimism that upward pressure could start to build in the WAF region as well. Today we are calling WAF/East in the region of WS50.5.

West African Suezmaxes remain firm and with the activity on the Afras in the states, owners will definitely be pushing for over WS82.5 for TD20. Especially with WS105 paid for CPC, expect owners to be very bullish early next week. Premiums for East are around the standard 10 points still, with few really desiring that run.

Mediterranean

On Suezmaxes in the Med TD6 has firmed this week with limited tonnage opening up in the East Med, we expect next done will likely be WS105 but owners are feeling very ambitious and there is potential for those who have left it late to fix to get caught. Med East is still very untested, there was a little activity this week on some tender barrels and we anticipate rates will be around $4.6m for Libya/Ningbo.

An underlying tightness of availability in the Aframax market has been a cause for concern, but the effects of this were kept to a minimum initially where activity levels were low in volume. Gradual changes to sentiment were however brought about where Libya started to clear down first decade stems, and Ceyhan barrels started to move. This coinciding with a multitude of cargoes within a narrow date range over in the US gave owners the final bit of leverage they needed, where European lists shed a few more units. Finishing the week with WS150 ex Ceyhan, sentiment is likely to remain firm when we return from the weekend break, however, there is likely to be a ceiling to all this, where larger units encroach on Afra upside and fixing date progression opens the lists back up, especially in the US.

US Gulf/Latin America

The VLCC market in the Americas remained subdued this week, with limited activity and a softer outlook mirroring trends of surrounding regions at the beginning of the week. The tonnage list remains moderately balanced with enough to cover the demand, coupled with a lack of fresh enquiry this has kept rates at bay as we reach the end of the week. The Brazil export market has been more active, but rates are yet to move in owners’ favour just yet. With the WAF region showing signs of a potential uptick the same could take place here. Today we are calling USG/China $6.8m & Brazil/East WS49.5.

North Sea

Afras in the North experienced a busier week with an active States market helping its case. Levels steadily rose as enquiry gathered pace and a couple ballasters took their chances crossing the pond and also looking toward the Med. Although moderate gains only were witnessed so far, there is an underlying feeling more points are to be had early next week. All eyes on Monday morning!

Crude Tanker Spot Rates (WS)

Clean Products

East

An active midweek in this AG MR market saw rates firm up around 20 points but since then enquiry has slowed. List is still tight on the front end but with little outstanding current levels are starting to feel a little toppy. Fresh correction to come here.

The main activity has been led by LR2s as although the LR1 list remains fairly short the volume has been on the bigger stems. A busy first half of the week led LR2 rates to firm rapidly with TC1 hitting WS145 and next done looking likely to be WS150. Stems are quoting up to 3 weeks out now and West runs look set to breach $4.0m soon. Last decade stems need to push into the market though from Monday.

LR1s are shorter but the longer runs have been relatively few. Still TC5 has echoed TC1 enough to push to WS155 with WS160 predicted. 60kt Jet AG/UKC passed $3.0m and next is likely $3.1-3.2m.

UK Continent

From this time last week the tension and pressure on the MR market has totally eased and we are back down to pre spike levels. The tonnage list looks pretty healthy going forward and the export volume is seasonally quite slow at this time of year, so it feels like August could be a pretty flat month. One element to note is the bad weather in the Atlantic which is unseasonal. This will likely delay laden vessels and potentially throw up some port delays into the mix, but the bad weather does not look to be persistent; it’s just a patch. General sentiment is quite weak in the West, and we could see a few more Russian players in the market as the oil export from Russia is slow.   

Steady week for Handies in the North as we have seen both parties sing from the songsheet and repeat last done levels for XUKC (30 x WS155) and UKC/Med (30 x WS145). The front end of the tonnage list has started to tighten a touch now off the back of continued cargo flow, but Handy owners will be cautious of the softening MRs and the potential threat of the bigger units jumping on 30kt clips. For now, sideways into the weekend but eyes on the under pressure MR sector.

Med 

A tale of two halves for MRs in the Med with the week opening relatively slowly but progressing into an active week by the end. Last done sits at 37 x WS127.5 for a Med-TA run and repeated which shows rates are steady. A potential talking point is with a tight front end and a few vessels going on subs this Friday, one could speculate there is a push from owners. However, the prospects of this will become clearer on Monday, once tonnage has restocked. 

On Handies, we have seen steady inquiry and fixing activity throughout the week for TC6 ultimately leading to rates improving early on and then stabilising at 30 x WS185 levels. As rates continue to hold for the second half of the week, despite a thinner tonnage list perhaps indicating more could be pushed for, it seems owners reach a point where they are content at these levels and in hope of extending this reasonable market are happy to nurture carefully and repeat last done. Prompt stems or replacements will be a delicate one to navigate, but for now we continue steady.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

It’s been an overall quiet week for Handies in the UKC as enquiry struggled to surface. Monday morning’s list showed tight availability, but as we approached mid-week, minimal activity had let positions creep up, and sentiment shifted from firm to steady. Reports of a handful of vessels on subs all at 30 x WS240 and repeating last done, proved this shift in sentiment. We saw a quiet end to the week, leaving modern units there to be worked in next week’s fixing windows. We think the steady sentiment will hold early next week, but enquiry will need to get off to a fast start.

The Mediterranean market has seen a relatively lacklustre week as enquiry was slow to clip units away early doors. A noticeable imbalance of availability was observed between WMed and EMed, where positions for the latter were plentiful whilst WMed tonnage was on the thinner side. As the week progressed, negative sentiment began to build, and levels came under pressure. Freight rates softened from WS235 for a vanilla XMed with WS230 booked towards the end of the week. A combination of under-the-radar fixing and premium cargoes from the Black Sea has helped to trim tonnage and prevent the list from being overrun. We expect to see replenishment restock the list and with units set to open up over the weekend, we think levels could come under pressure and potentially soften further.

MR

It has not been the week that owners would have hoped for in either region, as full stem enquiry has struggled to surface. In the North, positions were tight to begin with, and O/P fixing and part cargoes cleared the units that were available relatively quickly. The list is tight but naturally positioned MRs are expected to open around end of the first/early second decade. We expect to see levels firm up toward the 45 x WS170 mark on next done. The Med has not fared better with levels softening first to WS165 and then by a further 2.5 points from last done. Tonnage is balanced but on the lighter side, helping to steady the ship for now.

Panamax

It’s been another quiet week for Panamaxes this side of the Atlantic with little to report. The flat feel here continues as back-haul cargoes across the Atlantic continue to elude. We feel levels currently reside around the 55 x WS110 mark, but this is to be tested. Over in the USG, TD21 suffered a quiet start to the week with levels trending downward towards WS240 before rates found support and slowly began to rebound as vessels were clipped from the list. Owners will be hoping this enquiry can continue so levels can recover further.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeJul 30thJul 24thLast Month*FFA Q3
TD3C VLCC AG-China WS-244464754
TD3C VLCC AG-China TCE $/day-3,00022,25025,25026,50030,250
TD20 Suezmax WAF-UKC WS380778286
TD20 Suezmax WAF-UKC TCE $/day2,50026,75024,25027,50028,000
TD25 Aframax USG-UKC WS32152120145143
TD25 Aframax USG-UKC TCE $/day12,50035,50023,00032,75027,750
TC1 LR2 AG-Japan WS20148128120 
TC1 LR2 AG-Japan TCE $/day7,00035,50028,50025,250
TC18 MR USG-Brazil WS10200190249176
TC18 MR USG-Brazil TCE $/day2,00025,75023,75035,25019,250
TC5 LR1 AG-Japan WS7157150139150
TC5 LR1 AG-Japan TCE $/day1,50026,00024,50021,25022,250
TC7 MR Singapore-EC Aus WS-5190196203185
TC7 MR Singapore-EC Aus TCE $/day-1,25021,00022,25023,25019,250

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

Bunker Prices ($/tonne)

wk on wk changeJul 30thJul 24thLast Month*
Rotterdam VLSFO  +10509499512
Fujairah VLSFO  +15516501515
Singapore VLSFO  +12523511522
Rotterdam LSMGO  -8712720668

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