Collision Course

For over a year now, oil analysts have been warning of a looming oil surplus with expanding oil supply far outpacing demand. The risk of a significant stock build into 2026 has been further cemented by the rapid rise in OPEC+ production quotas, alongside growth in the Americas, whilst other factors such as sanctions, the economic outlook, and the energy transition could further impact the supply/demand balance.

Perhaps the most visible near-term sign of the surplus, is oil on the water. High frequency data shows that the volumes of crude and DPP in transit (excluding floating storage) is at the highest level since May-2020 when the Covid-19 pandemic temporarily crushed oil demand. Clean products at sea on the other hand, have been trending down through Q4 as autumn refining maintenance limits CPP export volumes. Floating storage (measured as tankers laden and stationary for 30 days or more) is another barometer of an oversupplied oil market. Floating storage has been on the rise all year and last week hit a 2.5 year high, yet for context the volumes represent just 40% of what was held at sea in the peak of the pandemic. Lower frequency data from the IEA shows that global inventories at sea and on land rose by 1.15mbd from January to September with further increases likely seen in recent weeks, as indicated by higher frequency data, which also shows sanctioned cargoes increasingly struggling to find a home. For the mainstream market, the economics of storing oil at sea remain unviable given the strength in time charter rates and backwardated oil futures. As such, the expected surplus will need to find its way into refining systems and land-based storage facilities in the near term.

The location, timing and scale of the stockbuild next year will be critical for the health of the tanker market in the second half of 2026. Under an IEA scenario, supply could exceed demand by 1.4 billion barrels next year, equivalent to nearly 4 million b/d. Clearly this is not sustainable and under such a scenario prices would fall to the point where production needs to be shut in. Demand of course could be stronger, whilst supply may also grow at a slower pace than expected, allowing for somewhat of a softer landing. We may also see significant builds in both US and Chinese strategic petroleum reserves (SPRs). The US SPR is 182 million barrels below its pre-war level, whilst China is thought to be adding around 169 million barrels of storage capacity over 2025-2026. Russian oil production might also come under pressure if the sanctions continue to escalate.

Ultimately, the current supply/demand projections suggest the oil market is on a collision course. For tankers, increasing volumes of oil on the water looking for a home is a bullish factor. But longer term, the market will need to find a balance. If this comes in the form of production cuts, coinciding with an increase in newbuilding deliveries, the second half of 2026 could look very different to today’s market.   

Oil on water (mb)

East

The week began with a steady pace of enquiry in the AG VLCC market as many returned from industry events, and it quickly became evident that the front end of the tonnage list remained tight. Only a handful of fresh cargoes surfaced early on, but even limited enquiry was enough to keep levels firm given the restricted availability. As the week progressed, most activity continued to take place under the radar, steadily chipping away at the list. Charterers who did step out were met with firm resistance, with owners holding back in the expectation that levels would continue to strengthen. Toward the end of the week, enquiry picked up, and with charterers competing for the same vessels after stepping out on top of each other, sentiment remained firmly in owners’ favour. Looking ahead to next week, charterers may gain some breathing room before moving onto second decade December cargoes. The tonnage list appears healthier on paper, though caution is needed given the amount of fixing taking place privately. Today we are calling AG/China ws139.

Suezmaxes in the Middle East have remained active throughout the week with a good level of demand for both short and long East runs. With a tonnage list that still contains few firm itineraries, owners will be looking for over 140 x ws75 via C/C for Basrah/West today. With such great returns on offer, we have seen a little bit of a ceiling for East runs, but the market remains firm at around 130 x ws175, depending on what ilk of ship is required.

Enquiries for the first decade of December for Aframaxes have begun to emerge, though overall activity appears slower this week. Nevertheless, sentiment in the Indo market remains firm, with owners anticipating continuous tonnage tightness – particularly as TMX runs remain active stepping into winter period. We assess Indo up runs at 80 x ws180. Recently, the sustained premium on DPP over CPP runs has attracted more LR2s into the ex-Australia trade, introducing a degree of competitiveness. However, the clean market has strengthened this week; the sustainability of this upward trend may influence owners’ deployment strategies. Tonnage supply for the first decade of December appears relatively balanced, which could see charterers to push below last-done levels. We assess TD14 at 80 x ws170.

West Africa

The week in the WAF VLCC market began with limited visible enquiry, with activity consistently slower than in the AG. Although sentiment remained broadly positive, the market continued to lack a clear fresh test particularly for runs heading east. Mid-week brought little change, with most enquiry being dealt with quietly under the radar and only one notable cargo covered at ws112.5 after attracting a modest number of offers. While the tonnage list remains on the tighter side, the slow pace of enquiry has kept fixing manageable for charterers, though caution is warranted given the underlying firmness filtering through from the AG. By week’s end, enquiry was still thin, and a proper test is required to gauge where the market really stands despite the firmer tone. Today we are calling WAF/East ws120.

The WAF Suezmax market hasn’t been particularly active this week but with a relatively tight tonnage list, owners will still feel confident pushing for 130 x ws155 for TD20. This is despite a sharp drop in the Americas last night, though we expect that market to rebound somewhat quickly with firmness on VLCCs and Aframaxes in the region. The premium to head East today is probably around 5 points, even though less was done earlier in the week due to favourable circumstances. 

Mediterranean

TD6 has remained firm this week and the limited firm positions has seen owners push up rates to 135 x ws185. Expect more of the same next week, with a Suezmax-heavy program for December from CPC. Libya/Ningbo has started to come back as a more regular trade, and with owners generally preferring to stay in the West in the current market, we estimate levels are around $6.7m.

Coming into the week a slide on Aframax levels was inevitable. Following a prolonged spell of lower volumes being traded, the build-up of availability weighed heavily in charterers favour.   Decrements between deals followed, with a benchmark Ceyhan falling to ws187.5 and shorter flats setting at ws195. At this point however, and just as we saw in the continent, the US gave owners a reason to be slightly more optimistic, with further decline being thwarted for now.  That said, the prognosis for the immediate outlook in the Med isn’t too dissimilar to where we started the week. Owners will still have their work cut out until local activity levels start to pick back up again.

US Gulf/Latin America

The Americas VLCC market experienced an uneventful week, with limited visible enquiry and a tonnage list that continued to make for a challenging to read. Freight levels and sentiment remained broadly firm, supported by a handful of fixtures, including a market cargo ex-Brazil concluding at ws110 for a run to Dalian followed by another heading into WCI covering at ws115. Activity on the surface remained sparse, with most enquiry conducted quietly under the radar, leaving owners in a comfortable position. The tonnage list has been further complicated by a lack of ballasters from the east, keeping positions tight. Overall, across the regions rates stayed steady, and slight upward movement was observed on some Brazil export runs keeping sentiment on the firmer side. Looking ahead to next week the USG market may see increased enquiry in the lead-up to thanksgiving, which could provide a boost to activity and help clarify the direction of freight levels. Today we are calling USG/China $13.90m. 

North Sea

Looking at the charts of where Aframaxes in the region are trading, ws157.5 would be an undeniable baseline evidenced again this week. This however doesn’t really paint the full picture. A slow week filled mainly with relets being programmed, market strength was starting to be undermined. A lifeline was eventually given to the region though, with TD25 picking up both in terms of activity and earnings, immediately boosting owners’ credentials in holding onto last done.  

Crude Tanker Spot Rates (WS)

Clean Products

East

Busy week back for the LRs post the fun and games of Bahri last week. The lists have tightened up across both sizes and as such have seen rates being positively tested. LR2s heading West up to $4.4m (via Suez) and with options for BEM transit the list has really thinned and as such owners looking to really push on the premium (circa $4.8m levels). TC1 tight of the natural window and assess 75 x ws155-160 for now. LR1s have been busy, but more so with off market enquiry. West at $3.2m levels via Cape and TC5 at the 55 x ws155 level for the natural window. But, we have seen much higher number off forward position which gives owners a nice footing to chase after paper, which traded higher again yesterday for December (ws196).

The week opened steady post-Bahri for MRs with TC17 at 35 x ws220 and TC12 at 35 x ws150, though a long list and LR1 pressure kept sentiment capped. By Tuesday, the softer LR1 tone filtered through, pushing XAG down into the high $200k’s and TC12 to 35 x ws145, with TC17 easing toward ws215. Wednesday brought plenty of fixing, but a well-supplied list beyond the prompt window held rates in place around ws215 and ws145. Thursday morning remained sideways, but the picture changed sharply in the afternoon. A heavy influx of fresh stems (particularly on TC12) tightened the front end and pushed TC17 up from ws215 to ws245. TC12, West and short rates are all due a fresh positive test on the back of this. Heading into the weekend, there are at least 9 cargoes in the window still looking for cover so expect bullish ideas from owners and momentum to continue next week.

UK Continent

Owners have seized the seasonal opportunity and the effects of long-term tonnage displacement this week and rates moved up across the board. The market is functioning in a remarkably prompt fashion as owners are drip feeding offers into the market based on itinerary firmness. This is creating rather a restrictive position for cargoes as you simply cannot book freight forward at the moment with a total void of ballast units. Usual differentials are totally out of the window and while TA voyages are seemingly still being discounted, other routes such as Brazil, WAF and XUKC are being run on a round trip. The ultimate dream being a voyage straight to the USG, capitalising on those export rates. We expect to see rates continue to push up, but owners are aware this needs be done protectively in order to solidify these better earnings. 

It has been a win for Handy owners this week with consistent cargo volumes creating a lack of supply and then a few replacements adding some extra spice. This has resulted in freight for TC23 closing at 30 x ws215 (up 22.5 ws points from this point last week). With the longer haul MR routes also firming there has been little appetite for the bigger units to compete on straight XUKC runs, meaning Handies have been in a strong position throughout. The weekend break comes at a good time which should hopefully see a few more itineraries firm as we head into early December laycans come Monday. Owners bullish here. 

Med 

MR owners have been at the helm of this market throughout the week. With the front end of the list tight for MRs and some tricky cargoes outstanding, owners have been bullish and pushing rates upward to the 37 x ws170 Med-TA mark. Med-TA for the most part has been driven by a firming TC2 and a tight list. Med-WAF continues to pay a premium and has firmed in line with Med-TA and TC2. The outlook is bullish for MRs going into next week with a keen eye on enquiry to keep this positive rate momentum going.

A week which started optimistically for Handy owners in the Med – carrying over from the week prior – has materialised. We opened around the ws200 mark with some tricky stems outstanding, a theme that has run throughout the week with owners cautious not to jump the gun but felt they could slowly squeeze more out of rates as the list continued to tighten. The tight list and steady enquiry created enough upward pressure that we close the week at the ws230 mark. A handful of failures have been seen as charterers have gambled on itineraries and vessels – a telling sign of this market’s strength at the moment. Owners will be aware that charterers won’t be getting any relief from the list in the short term so the ws230 mark should be where we open next week – all eyes will be on enquiry to see if this can be maintained throughout, however.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Northwest Europe has seen a consistent stream of cargoes chipping away units from the list, leaving only a few units free to work off early dates. 30 x ws235 was the going rate XUKC through the week as the tonnage list was whittled down and relets went into programme. We soon expect to see levels hitting the ws240 mark as we look to next week.

The Mediterranean has seen enquiry flow thick and fast from the go with levels firming from lows of ws180 fixed multiple times early into the week before the list thinned out and the ample prompt tonnage cleared. Levels soon firmed up to ws185 and ws187.5 by the weeks end. We expect to see ws190 early into next week with owners looking to push on further as we move firmly into December dates.

MR

MRs in the North have remained relatively tight for the week with naturally placed units thin, but some reprieve was found in WMed ballaster positions. The market awaits a true fresh test for an XUKC run with rates expected between ws165-170.

The Med has seen a rather busier week with full stem enquiry clipping ships from the list with ws160 in sight for owners as we look ahead into next week.

Panamax

Little to report for Panamaxes this side of the pond as tonnage has been thin on the ground and enquiry elusive. Over in the USG owners have seen a quieter market compared to recent weeks but overall levels have stayed stable as under-the-radar fixing keeps levels ticking over between WS195-200.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeNov 20thNov 13thLast Month*FFA Q4
TD3C VLCC AG-China WS513412984109
TD3C VLCC AG-China TCE $/day5,500136,750131,25075,750101,000
TD20 Suezmax WAF-UKC WS-1156157126143
TD20 Suezmax WAF-UKC TCE $/day-50077,75078,25059,50066,250
TD25 Aframax USG-UKC WS-11203214191202
TD25 Aframax USG-UKC TCE $/day-4,25056,00060,25052,50051,250
TC1 LR2 AG-Japan WS7151144121 
TC1 LR2 AG-Japan TCE $/day2,25038,00035,75028,000
TC18 MR USG-Brazil WS-13228241244230
TC18 MR USG-Brazil TCE $/day-2,75032,00034,75035,50030,250
TC5 LR1 AG-Japan WS0150150129159
TC5 LR1 AG-Japan TCE $/day2,25026,75024,50020,75026,250
TC7 MR Singapore-EC Aus WS5201196182191
TC7 MR Singapore-EC Aus TCE $/day75024,00023,25021,00021,250

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

Bunker Prices ($/tonne)

wk on wk changeNov 20thNov 13thLast Month*
Rotterdam VLSFO  -10415425406
Fujairah VLSFO  -5448453438
Singapore VLSFO  -4451455445
Rotterdam LSMGO  +10738728631

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