Contents
Diesel, Drones and Donald
The Trump administration has been busy easing sanctions over the past couple of weeks. On 9 October, OFAC issued General License 135. It allows the sale, delivery and import into the US of Russian-origin diesel until 7 April 2027. On 16 October, Trump waived the main measures of the Lindsey O. Graham Sanctioning Russia and Iran Act, which he signed on 18 September. The Act provides for a 500% tariff on Russian goods and up to 100% tariffs on major buyers of Russian oil and gas. Last week, news also emerged that the administration was considering easing shadow fleet sanctions, as covered in last week’s report.
Of the three measures, the Graham Act waiver has no physical impact, as the tariffs were never in force. Easing shadow fleet sanctions could, to an extent, provide some additional tanker capacity, primarily for shuttle runs through Hormuz. The diesel licence sits somewhere in between: it is unlikely to meaningfully ease the global diesel shortage, but it carries a strong political message.
The first problem with the diesel waiver is volume, as Russia has little to spare. Ukrainian drone attacks on refineries cut domestic supply, prompting Moscow to ban diesel exports in July. Seaborne exports from western terminals fell to an average of 510kt per month in Q3, from 3.27mt per month last year. Following the agreement with the US, the Russian government has begun lifting the restrictions, authorising the immediate release of 500kt for export globally. It has also confirmed it stands ready to supply 300kt to the US this month, followed by 500kt in November and 1mt in December, with three MRs reportedly already heading to the US with diesel. So far, however, preliminary trade data shows little change, with October exports to date only modestly above levels seen over the July-September period. Meanwhile, Ukrainian strikes continue. The Ryazan refinery was hit again on 15 October, and Russian officials reported another attack on a refinery in the St Petersburg area on 18 October. Still, Kyiv has shown some willingness to compromise: on 19 October, President Zelensky offered a 30-day pause in return for Patriot cover for Ukraine’s airspace. Washington has not signalled it will accept, and instead pressed Kyiv to halt strikes altogether.
The legal side is another stumbling block. The licence does not cover sanctioned vessels, services such as bunkering, or the price cap, which limits the role of mainstream tankers. EU and UK rules have not changed either. The EU still bans trading, brokering and transporting Russian diesel unless it is within the price cap. EU and UK banks and insurers cannot finance or insure cargoes above the cap, and with diesel prices this high, many cargoes are likely to be above it. In the US, the licence may also face a legal challenge, since the 2022 Russian oil import ban can only be lifted once the President certifies to Congress that its conditions have been met.
In the near term, volumes are unlikely to amount to anything meaningful unless attacks on Russian refineries stop. However, if Ukraine is successfully pressed to halt the attacks, the implications would be considerably bigger, as that would eventually allow Russia to export more to its usual trading partners, not just the US. Politically, Trump appears to be warming to Russia, although his position can change quickly. With this shift in Washington and parts of Europe grappling with social unrest amidst mass migration, rising living costs, soaring fuel prices and the growing influence of right-wing political parties, could Europe be forced to also reconsider its position?
Russian Diesel/Gasoil Exports from Western Terminals (kt)
Crude Oil
East
The AG/Red Sea VLCC market opened the week with an early Red Sea quote, and several vessels quietly came off the tonnage list on deals not yet reported. Cargoes kept surfacing, but activity was limited and levels in other regions were easing, so rates softened through the week. Fixtures and rumours of cheap numbers confirmed the downward trend. Cargoes were requoted throughout the week, especially in Yanbu, providing some visible activity. The week closed on softer sentiment, with a significant decrease confirmed on TD34 due to the healthy amount of tonnage, and the softening trend in all surrounding markets provided charterers with more confidence in the market.
The Suezmax market in the East has begun to soften as more VLCCs come into play after the recent spike. There are more ships opting to ballast to West Africa this week due to the limited enquiry, and we expect more of the same next week, with pressure on rates to continue.
The Asia Aframax market saw limited encouragement this week, with earnings easing to around $229,000/day, down roughly $33,000/day over the past two weeks. Chartering activity remained subdued, allowing the tonnage list to replenish and taking some heat out of the recent rally. Enquiry across adjacent markets continues to absorb tonnage, though freight has similarly begun to trend lower, reflecting the broader softness in sentiment. Charterers have consequently regained some leverage, with greater optionality allowing them to test lower levels as the market searches for its next floor. Despite the correction, earnings remain historically elevated, though the near-term bias points to further consolidation until a fresh wave of demand provides clearer direction. We close the week softer, assessing Indo/Up at 80kt × WS740.
West Africa
The WAF VLCC market stayed quiet throughout the week, with little fresh activity. Owners started the week relatively firm, but a fair amount of available tonnage and softening in surrounding regions kept pressure on freight. Questions remain over whether enquiry will slip away to smaller sizes. With a relatively healthy list, further adjustments have been seen, especially due to the strong activity on the other side of the Atlantic providing direction, and the IOC requote. Although a fresh test would be welcome to start next week on a better footing and to see if charterers could flourish enquiries in this region.
The Suezmax market in West Africa has softened this week. The availability of prompt tonnage and limited enquiry seems to have finally broken owner sentiment. Charterers will be looking to chip away even further next week, with paper markets for November expecting rates to continue to fall substantially. We have seen an uptick today, though, which could indicate the market is starting to find a new floor, still with unbelievable TCEs for owners. Rates for WAF/UKCM fell to WS715 on Friday, with minimal enquiry outstanding.
Mediterranean
TD6 has stayed remarkably firm despite the fall in rates in West Africa, with owners managing to repeat last-done levels. This market is due a fresh test, though, and the outstanding cargoes will be expected to take a hefty chunk out of the last-done rates of WS1100. It seems likely we will see this market head back below WS1000 next week, but charterers will still have their work cut out due to the new difficulty of the whole of the Black Sea being classified as a war risk zone for dates being worked now.
The Suezmax market in the Med is also under pressure, as to be expected. We haven’t seen a great deal of enquiry this week in the region, and the list is continuing to build. With the writing on the wall that we have seen the top of the market, it seems likely we will see more owners willing to lock in these levels for longer runs into the East while they still can.
The Med Aframax market fared a whole lot healthier this week (if you can call a market low starting with a 7 unhealthy), with levels breaking back into the 800s initially and then establishing ever higher. The rebound, however, is what perhaps took some by surprise, given TD25 was still falling when the tides turned. This is yet another illustration that underlying confidence and resilience from owners again prevails, proving an overriding factor to market fundamentals. Looking ahead, and with high 800s on subs and lists being tighter now here in Europe (and without winter seasonality yet to fully take hold in the Med), owners can be confident that this market is set to last for a while yet.
US Gulf/Latin America
The States VLCC market remained subdued all week, as deals concluded under last done set the tone and weaker Brazil rates dragged sentiment down. Petrobras generated most of the activity in the Atlantic, with weaker freight concluded day after day while the tonnage list gently rebuilt. The lower levels could open the door to a surge of enquiry, and the key question now is when and where the floor will be found, especially ahead of next week.
In the Americas, Suezmax rates are also falling, but recent weeks of insanely high levels have seen charterers fixing local vessels out of Brazil on forward dates, which is keeping the list of local tonnage tight, and there are only a few vessels who are likely to fall on their sword and really drop the market.
North Sea
Decent gains, with tonnage getting sucked into the Med and States markets and helping to buoy local levels. With the Med on the up, owners’ sentiment remains strong and ideas are still punchy. Next week looks likely to keep the pressure on, and owners’ resolve will be there to push further. Local players are going to be fewer and further between as we hit a new week.
Crude Tanker Spot Rates (WS)
Clean Products
East
A negative correction was seen across both LR sizes, as expected with the lack of stems. Charterers exercised their pressure on owners and pushed to reverse the gains made over the last weeks. TC1 sits at 75 × WS500 levels and TC5 at 55 × WS510 levels. The lists aren’t as tight as they have been in previous weeks, but that said, charterers still need to proceed with caution, and we continue to see a lot of off-market hidden cargoes as charterers protect their exposure.
A steadier start to the week followed sustained activity last week in the MR sector, with TC17 repeating WS560 and expectations of a potential bounce, as stronger earnings in the East encouraged South Africa ballasters to head in that direction. However, a slow flow of fresh enquiry and a healthier list, coupled with softer LR sentiment, kept pressure on rates. Despite limited activity ex Sikka/Fujairah-Sohar, the firming East market continued to lend support, with TC7 earnings remaining above those in the AG. By midweek, TC17 had slipped to WS550, although further ballasters going on subs in the Far East helped tighten the front end of the list. As the week draws to a close, very little remains outstanding, with rates expected to hold steady for now and a potentially tighter list offering some support heading into early November.
UK Continent
A lack of ballast MR tonnage, an excitable USG market and a buoyant Med sector have been giving plenty of arguments for owners in the UKC to press on last done rates, and finally, as we move into the second half of the week, we see positive increments achieved. Partnering with a super-tight Handy UKC list, we’ve seen ships taken out for XUKC as well as Med loading stems, which gave the final impetus for TC2 improvement to the 37 × WS230 mark now. WAF remains quiet and untested, but expect the number 3 to start being thrown about by owners there. A thumping storm hitting our shores over the weekend could well add some replacement spice to our Monday morning start.
It has been an active week for Handies in the north, and the issue for those looking to move cargoes has been a real supply issue up to the end of the month. MRs have been there to gobble up some short-haul volume, but the catalyst for a rate shift on the 30kt clips was an ARA/Sines jet stem going on subs at 30 × WS455. Owners are bulled up off the back of this, with XUKC closing the week at 30 × WS445. Weather is also causing an issue on some itineraries, so eyes on how supply is looking come Monday.
Med
A steady week passes for MRs in the Med, and with surrounding markets either firm or showing signs of rebounding, general sentiment is rate-positive. The naphtha/condensate draw eastward remains, which supports this narrative as tonnage is drawn away. A couple of factors to watch will be weather straining itineraries and grade sensitivity, with the naphtha/condensate draw east still apparent. A firm itinerary is gold dust in this current market due to lots of moving variables, and owners grow in confidence if they can hit specific dates.
An active week for Handies here with owners managing to keep the pressure very much on. Regular enquiry, grade sensitivity and load port sensitivities have all been at play, leading to a spread on rates. However, rates corrected south on a 20-year-old vessel to WS510, which seems to be where rates will hold going into the weekend. We expect a busy Monday, given there has been minimal end-month enquiry as of yet, which only serves to bolster owners’ position in the market. The only real threat to the ongoing success they are enjoying is the larger cubic MRs, who could encroach, as the earnings are very attractive.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
A handful of naturally placed options remained at the front end of the UKC list, though sentiment was that owners would maintain bullish ideas going forward, with rate expectations around WS365-370. Under-the-radar activity was expected, and a couple of vessels were clipped away early on, with the market firming after reports of WS395 being done, which became the new benchmark for the UKC and started to close the gap with the Med. Stormy weather is now making its way into NWE, which may cause delays and itineraries to slip, likely fuelling firmer market conditions, although cargoes will need to flow for this to materialise. We expect to see owners shooting for WS405.
A surprisingly active start to the week in the Med saw a handful of vessels clipped away on subs, with WS470 repeatedly reported. The rest of the week was a little flatter, although vessels continued to be absorbed and WS470 continued to be repeated. Owners are now looking to push on further, with expectations around WS475-480. There is a suspicion that charterers may be holding back a few early November stems in an attempt to calm the market, which could lead to another active start next week, with level expectations around WS475-480 for early next week.
MR
Most of the UKC list was made up of MRs, providing availability for stems and some competition amongst owners, though sentiment remained firm, with rate ideas around WS350-360. Into the week, full MR stems remained elusive, and MRs were seen covering Handy stems, while some elected to ballast down to the Med in search of stronger employment. With Handy rates firming, so did expectations for MR, towards WS360-365. Owners are still expected to look to close the gap with the Med when called upon.
With the Aframax market seeing a rebound, MRs were expected to play on the minds of charterers for split stems. Against an already tight natural-date list, rate ideas were only expected to climb from WS440-450. Activity through the week was itself somewhat elusive, although owners’ ideas firmed towards WS450-460, supported by the tight availability picture. Looking ahead, Aframax firming in the Med continues to drive rate expectations.
Panamax
Tonnage was tight for end-month dates, with rate ideas around WS370-380. Availability is now largely concentrated around the first and middle parts of the second decade of November, with owners remaining focused on getting vessels back TA. Despite the lack of a meaningful test this week, firm Aframax markets continued to support sentiment. This in theory could give owners room to push levels.
Rates appeared to come off after the market started to look a bit toppy, with levels easing towards WS665-675 despite heightened geopolitical tensions. The market through the week seemed to find a steadier footing, with owners appearing keen on local employment, seemingly betting on a near-term rebound in rates. Rounding the week, levels held around WS675, with forward cargoes repeating last done, while firmer paper continued to support sentiment.
Dirty Product Tanker Spot Rates (WS)
Rates & Bunkers
Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)
| wk on wk change | Oct 22nd | Oct 15th | Last Month* | FFA Q4 | |
| TD3C VLCC AG-China WS | -73 | 1,208 | 1,281 | 1,158 | 1,109 |
| TD3C VLCC AG-China TCE $/day | -86,250 | 1,347,500 | 1,433,750 | 1,292,500 | 1,222,750 |
| TD20 Suezmax WAF-UKC WS | -189 | 731 | 920 | 435 | 646 |
| TD20 Suezmax WAF-UKC TCE $/day | -121,500 | 429,250 | 550,750 | 242,000 | 366,000 |
| TD25 Aframax USG-UKC WS | -104 | 652 | 756 | 558 | 728 |
| TD25 Aframax USG-UKC TCE $/day | -39,750 | 209,250 | 249,000 | 175,250 | 230,500 |
| TC1 LR2 AG-Japan WS | 89 | 1,075 | 986 | 876 | |
| TC1 LR2 AG-Japan TCE $/day | 29,000 | 329,250 | 300,250 | 265,000 | |
| TC18 MR USG-Brazil WS | -7 | 453 | 460 | 299 | 366 |
| TC18 MR USG-Brazil TCE $/day | -2,000 | 62,000 | 64,000 | 35,250 | 42,750 |
| TC5 LR1 AG-Japan WS | 123 | 1,105 | 982 | 890 | 900 |
| TC5 LR1 AG-Japan TCE $/day | 29,500 | 244,750 | 215,250 | 194,250 | 190,250 |
| TC7 MR Singapore-EC Aus WS | 39 | 589 | 550 | 473 | 444 |
| TC7 MR Singapore-EC Aus TCE $/day | 6,000 | 78,250 | 72,250 | 60,000 | 51,750 |
(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis
Bunker Prices ($/tonne)
| wk on wk change | Oct 22nd | Oct 15th | Last Month* | |
| Rotterdam VLSFO | +14 | 747 | 733 | 674 |
| Fujairah VLSFO | -10 | 967 | 978 | 972 |
| Singapore VLSFO | +23 | 926 | 903 | 847 |
| Rotterdam LSMGO | +26 | 1401 | 1,375 | 1,393 |
