Force Majeure

The Libyan oil sector is no stranger to output disruptions but this week has seen the North African producer back in the spotlight, with Libya’s NOC declaring force majeure at the 300kbd Sharara oil field due to a resurgence in local protests over fuel prices and a reported lack of economic opportunities. This comes after a series of production shutdowns in the wake of the Libyan Civil War, with the country’s oil infrastructure often being a target between the various factions. The shutdown in the Sharara field has affected pipeline crude shipments to the Zawiya oil terminal, where storage capacity is limited. Additionally, there are now reports that the 120kbd Zawiya refinery could become a target for separate protests in a sign of potential escalation if the groups demands are not met.  

For the time being, surprisingly there has been a somewhat positive impact on the Cross-Mediterranean Aframax market, with only 4-5 prompter cargoes being affected and around 10 cargoes being pushed into next week which has provided some support for local Aframax rates and has led to a stronger feel for the region. This can be explained by the port facilities at Zawiya remaining operational despite lower crude deliveries but a prolonged outage could start to negatively impact the market, once the current backlog of cargoes has been cleared.

In terms of what could be at stake, Libyan oil exports averaged 1.035 mbd in 2023, with December posting particularly strong volumes at 1.1 mbd, the majority of which was shipped via Aframax and to a lesser extent Suezmax tankers. The vast majority of this crude stays locally in the region, with Italy the largest importer of Libyan grades taking 380kbd of Libyan crude in 2023. Libyan cargoes have also found a home in Spain and France, where Libya’s light sweet crude is a popular feedstock for Mediterranean refiners for processing into gasoline. Alternative grades such as Algeria’s Saharan, Azeri and CPC blend are all likely to find support, if loadings are not resumed soon, which could put some downside pressure on local refining margins.

All of this comes against the backdrop of an ambitious plan to boost Libyan output capacity to 2 mbd by 2030. Recent data shows Libyan crude output has remained broadly flat in 2023 after staging a recovery in the second half of 2022, following a period of disruption and blockades at key facilities. 2023 production averaged 1.145 mbd which makes the 2030 target of 2 mbd given the current issues potentially challenging to achieve unless the required stability and sustained output growth can be achieved towards the intended target.

The current disruption has so far been limited to the Sharara field and negotiations are underway to find a solution. Yet, this development shows that the risk of supply disruption in Libya has not faded after previous episodes and could flare up again in the future, which may pose a risk to the Mediterranean crude tanker market, if future disruption were to be significant enough. However, ambitious production targets require a stable investment environment for international oil companies to operate and bring additional capacity online. While the current turmoil is not expected to reach the same level seen in 2022, it shows the ongoing difficulties faced by Libya’s oil industry and its expanding production.

Libyan Crude Production (mbd)

Crude Oil

Middle East

VLCC Freight rates in the AG rebounded this week as we saw a busy end to January and ended the week with rates approaching ws 70. The uncertainty and attacks on ships this week is adding fuel to a firmer approach by owners, although we are close to the top on this current cycle and a lot will depend on when Charterers start to move to cover early February liftings. In today’s market we are calling a 270,000mt AG/China run at ws 68 and 280,000mt AG/USG at ws 47.5.

Tensions are rising in the AG following air strikes on Yemen at the end of the week. Despite this, there is still adequate tonnage for the moment and TD23 runs are around 140,000mt x ws 87.5. Rates heading East are approximately 130,000mt x ws 135 today.

There has been little activity reported in the East this week as options remain available to Charterers in the AG, especially for eastbound voyages. Growing tension in the Red Sea remains the big talking point as rates for westbound cargoes managed to hold, if not inch up, despite the lack of cargo enquiry. We finish the week with AG/East at 80,000mt x ws 207.5.

West Africa

It’s been a better week for owners in WAF as Charterers were looking for coverage on Suezmax stems up to the UKC and we had a notable increase in cargoes going East after the lull. Owners sentiment continues to firm as we saw increases in the AG and a busy Atlantic market further West so today we are expecting a WAF/China run to fix at ws 74 level.

Suezmax markets in West Africa have been somewhat inactive on the surface this week despite a more turbulent market in the USG, TD20 is around 130,000mt x ws 142.5 today, and to head East, premiums are around 5 points. Minimal activity and several ballasters from the East could put pressure on rates next week.

Mediterranean

The market in the Med has been very quiet for Suezmaxes this week and there are multiple ships free to work for TD6 today, and we assess that the next-done will be approximately 135,000mt x ws 145. Cargoes heading East from Libya today will be somewhere around the $5.6M mark.

Rates in the Med Aframax market have pushed up over the course of this week. The catalysts were uncertainty in Zawia and an increase in activity across the region. Due to this, the list has gradually been worn thin and has not been replenished on the front end, as many have decided to ballast over to the USG. Cross-Med rates started the week at ws 175 levels and as we end, we are at ws 190 levels. With the Med market Firming and the list on the thinner end, the near horizon provides owners with something to be optimistic about.

US Gulf/Latin America

It was a busy week in this zone with a plethora of cargoes from the USG and Brazil for export. The tonnage availability for first half February has tightened considerably and a recent spate on T/C activity has had a strong impact on owners expectations. Many Charterers struggled to cover stems as owners were asking for way in excess of last done and some were forced to withdraw or move dates back. We expect a USG/China run will fix in the region of just $10.3M in today’s market while a Brazil/China run is paying around the ws 71 level.

North Sea

It was a comparably quiet week in the North compared to surrounding markets in terms of volume. With the USG market hitting the headlines, several ballasters have decided to leave the region as rates across the pond have skyrocketed. This has thinned the list and caused rates to gradually increase throughout the week. We close the week at ws 190 for an XNsea voyage and expect this trend to continue as we look into next week.

Crude Tanker Spot Rates (WS)

Clean Products

East

The LRs have generally had a positive week with both LR1s and LR2s being busy in all directions. LR1s have seen their rates edge up although not as much as they could without being slightly hampered by the LR2s especially westbound. A 55,000mt naphtha AG/Japan run rests around ws 190 on 2024 flat rates, but needs to be tested and less may now be seen with the West runs being that much more difficult. A 60,000mt jet AG/UKC was last fixed at $3.95M with around $800k extra for routing via the Cape. But these economics may not work for long and may slow the trade down.

LR2s have been busier but rates have faltered slightly. A 75,000 mt Naphtha AG/Japan run is now at ws 150 and flat with 90,000mt Jet AG/UKC trip at $4.6M. With the number of ships fixed this week and the outstanding cargoes, rates should be bouncing back up now. But with the overnight attacks by the UK and USA on the Houthis, the Bab al Mendab strait is effectively closed for commercial shipping for 72 hours and we will have to see how this affects trade flows and the markets. Its a very big unknown and hard to predict. For now all fixed ships for westbound voyages will demand a Cape routing to be safe but for how long the added freight and the extended delivery can be accepted is also unknown.

A busy week for the MRs East of Suez with rates nudging higher off the back of a sustained flow of cargoes throughout. With new flats beginning to come in we close the week with ws 280 for TC17 firmly established and a tight list up to end month making coverage in the next week or so quite a tough task. We also expect to see those with cargoes in the 25-30 window pick off firm units to take early cover. With Singapore busier, the lack of ballasters from the East is telling and as a result the vessel count is the lowest we have seen for sometime. With all eyes on how the situation in the Red Sea develops, expect to see Cape Routing the only viable option in the short term for those looking to head West.

This week, the North Asia MR market took a breath as cargo enquiries slowed down from 20th onwards but back haul LR activity seem to be increasing. The Singapore market gained strong momentum due a good tonnage clearance with most units ballasting to North Asia or the AG combined with a flurry of TC7 movement. The firming AG MR market also lent a hand here.

Mediterranean

All in all it’s been a sluggish week for the handies plying their trade in the Mediterranean with activity feeling a bit stop start throughout. We began the week with XMed trading at 30,000mt x ws 200 and a good influx of cargoes on Monday but with the list well-supplied following the weekend we saw rates come under some pressure by midweek. 30,000mt x195 has been repeated since for vanilla runs with higher only achieved for restricted cargoes. The Black Sea has continued to track XMed at its standard +40 premium this week with 30,000mt x ws 235 achieved this week. Heading into the weekend a couple cargoes remain to cover with a steady finish expected rate wise. 

Finally to the Med MR’s where we have seen rates fall this week off the back of a weakening TC2 market. 37,00mt x ws 150 was the call for Med/TA on Monday morning but with TC2 slipping to the 37,000mt x ws 115-120 levels it wasn’t long until we saw the Med start to follow suit. Med/TA now sees itself at 37,000mt x130 with WAF expected to land at +20-25 points when next tested. At the time of writing a few cargoes are outstanding but with the list well-balanced, rates are likely to be repeated.

UK Continent 

This week has felt a little like building a house of cards for the Owning fraternity of UKC MRs, as just as some momentum and activity seemed to be building, we see a fixture done that knocks the tower over and Owners have to restart all over again. TC2 has bounced between 37,000mt x ws 115-125 and most likely we will settle somewhere in the middle, depending on what options Charterers are after. TA still remains the preference with the USG market improving, but WAF has been the busier of routes and with that we’ve seen the premium grow up to around 25 points now. X-UKC runs have seen some good interest also and Charterers have exploited the excess tonnage on this size which has ruined any flow of cargoes to the handies. Despite all this, we do see a good number of ships fixed and a busy start to next week will be very welcomed by Owners looking to pick themselves up off the floor. 

As mentioned above, this Handy sector has been dismal with the larger MRs gobbling up any X-UKC enquiry as they look to weather the storm till improved rates appear around the corner. This has meant we’ve seen very few handies actually clipped away with the minimal testing ending the week at 30,000mt x ws145 levels for X-UKC. MRs need to improve to give a chance to this sector. 

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Despite a limited position list for the duration this week, rates were only pushed gradually to the heights of ws 325. Heading into next week with a few more local units fixed leaving the region the market seems poised for further incremental gains early on.

Bad weather and disruption in the Turkish straits caused charterers to reach slightly ahead of the natural fixing window, in turn firm East Med units remained thin on the ground. Enquiry did seemingly stall the back end of this week as charterers will be welcoming the weekend break to allow itineraries to firm.

MR

In the continent this week, MRs followed the familiar theme for most of the week by taking part cargo stems as a time filler. After a long-awaited 45kt test, one Owner was approached for an ARA/Med run, resulting in 45,000mt x ws 225. Similar to the handies, MR availability right now is limited, which will undoubtedly see levels continue to climb if another test is on the horizon. As we look further south, full stem enquiry has been kept mainly behind closed doors this week. This week, the handies experienced a significant spike in demand, leading to swift employment opportunities for MR Owners. Looking forward to next week, there is a strong feeling that we could see a rise in levels upon the next 45kt test.

Panamax

Limited availability remains this side of the pond as the states market continues to flourish. Expect owners to keep firmly focused on the states region as Panamax enquiry in North and Med dwindles.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeJan 11thJan 4thLast Month*FFA Q1
TD3C VLCC AG-China WS+1269575664
TD3C VLCC AG-China TCE $/day+14,50043,50029,00037,25038,250
TD20 Suezmax WAF-UKC WS+714313697119
TD20 Suezmax WAF-UKC TCE $/day+5,00060,50055,50040,00046,250
TD25 Aframax USG-UKC WS+22303281156214
TD25 Aframax USG-UKC TCE $/day+8,75086,50077,75039,25054,000
TC1 LR2 AG-Japan WS-15154169149 
TC1 LR2 AG-Japan TCE $/day-5,25031,25036,50037,000
TC18 MR USG-Brazil WS+4220216311208
TC18 MR USG-Brazil TCE $/day+50025,00024,50050,25022,750
TC5 LR1 AG-Japan WS-2188190152182
TC5 LR1 AG-Japan TCE $/day-25029,75030,00025,50028,500
TC7 MR Singapore-EC Aus WS+15250235221232
TC7 MR Singapore-EC Aus TCE $/day+3,00027,25024,25028,75024,250

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

Bunker Price s ($/tonne)

wk on wk changeJan 11thJan 4thLast Month*
Rotterdam VLSFO  -14546560526
Fujairah VLSFO  -25585610571
Singapore VLSFO  -12590602565
Rotterdam LSMGO  -1740741710

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