Indian Expansion

Until recently, Indian CPP exports were broadly flat for the past 9 years, averaging around 1.2mbd. Whilst domestic refining capacity grew over this period, incremental output was largely used to service domestic customers. This year, exports have grown at the fastest pace since 2021 and could be set for further growth as the country continues to expand its refining capacity.

Unlike most countries, India’s near term refining ambitions are not reliant on a few greenfield mega projects, and instead are mostly expansions and upgrades to existing facilities. Next year the nation is expected to commission 680kbd of new capacity, the largest increase for more than a decade. With so much new capacity coming online in such a short period, further increases in Indian CPP exports could be seen in the near term.

Next year several projects are due to start up, including a 200kbd expansion in the north of India at Panipat, 120kbd at Numaligarh and 60kbd in Bina (all far inland). The only greenfield refinery project to come online in the near term is the 180kbd Barmer refinery, which is scheduled to start operations later this year, albeit taking time to reach design capacity. Nearer to the coast, a smaller 80kbd addition will come online in Koyali. Given nearly all of the capacity additions coming online next year are located inland, they are unlikely to be exporting their product via sea. However, coastal refineries may find it harder to sell product to inland customers, particularly those on the West Coast and as such could be forced to look overseas for new customers, leading to further gains in exports once these new facilities come on stream. However, the growth will be tapered by rising domestic demand. India’s oil demand is set to grow at a faster pace than any other country, which could limit increases in, and eventually pressure export volumes. Much will depend on the how long it takes these new refineries to reach their design utilisation vs. the pace of demand growth, but over the long term, downwards pressure in Indian CPP exports could materialise.

Nevertheless, in the short term, product tankers may enjoy one last increase in clean exports as the country commissions new plants, before rising domestic demand reverses this trend once again. For crude tankers, the picture remains positive. India’s domestic production is forecast to post a marginal decline, meaning all of the increase in refining runs will require substantial increases in crude imports.

Indian Oil Demand & Refining Capacity (mbd)

Crude Oil

East

The AG VLCC market began the week on a subdued note, with public holidays in China and Korea contributing to a slow start and only a handful of third-decade cargos on the board. Charterers managed enquiry levels carefully, preventing any early upward movement in rates. As the week progressed, it felt like the market was going to ease after charterers were able to target competitive ships needing to find a home in order to put pressure on freight levels. Enquiry levels had picked up, which was long awaited and the Atlantic basin market started to show signs of improvement, which had a decent impact on sentiment amongst VLCC owners.  Rumours of high numbers began to be reported for market deals, creating conflicting opinions as to what was true and where these deals took place. By mid to late week, once enquiry really started to pick up, charterers were met with greater resistance from Owners, who would have had one eye on what was taking place in the Atlantic basin. In the past 24 hours, news broke regarding 3 berths in Rizhao being sanctioned & China’s new fee for all US owned / operated ships calling at Chinese ports.  Whilst it is still early days, this will have an impact on the VLCC market and looking ahead to next week, we can expect freight levels to push on further. Today we are calling AG/China WS922.5 & AG/West at WS56.

Rates in the East remain under pressure with charterers looking to break below 140 x WS65 via C/C for Basrah/West today. With uncertainty surrounding the region regarding the new Chinese port fees, we could likely see some volatility here next week, so stay tuned. We estimate AG/East at around 130 x WS125 today, but a firming VLCC market could start to spill over into the Suezmaxes early next week causing rates to firm.

The Indo region remained quietly active despite the Chinese Golden Week holidays. Activity was slower compared to the previous week, though the list stayed somewhat tight. Dates have now rolled into the second half of the third decade, but the market expects earlier enquiries to surface next week. A fresh wave of Vancouver exports provided notable support to the segment, drawing several owners away from Indo, with TCEs showing at least a $12,000/day premium over TD14. This has helped keep the regional balance firm and limited downside pressure. Overall, sentiment remains steady, with fundamentals suggesting more upside than down as we assess Indo/Oz at 80 x WS125.

West Africa

The West Africa VLCC market mirrored the subdued tone seen in surrounding regions in the first half of the week, with limited amounts of enquiry which did not allow for any real movement in freight rates. The tonnage list appeared healthy on paper but as the week progressed ships had noticeably exited the list after being covered in private deals.  As we reached the midway stage, the list continued to thin leaving fixing an uphill task should charterers have decided to step out. Rates had began to improve after higher numbers were reported in the adjacent markets, giving sentiment a further boost. Overall, enquiry levels remained modest, with cargoes drip-fed into the market but since the recent spike in the AG, on paper freight rates here have jumped up. The WAF VLCC market now needs to see a fresh TD15 style run to see exactly where the land lies. Today we are calling WAF/East at WS90 & WAF/UKC at WS95.

Suezmaxes have come under some pressure since the start of the week and today we estimate rates to be around 130 x WS105 for TD20. Though the list has tightened up and with more activity from the Americas, owners are feeling quietly confident that this will be the bottom. The premium to head east is around 10 points today, though we haven’t seen as much enquiry for East runs compared to the previous month.

Mediterranean

TD6 dropped slightly to 135 x WS140, though there does seem to be heavy resistance around these levels and chipping any further below is likely to be a real challenge. Libya/Ningbo remains untested this week, we feel Owners will be looking for about $5.4m, but this is really due a fresh test.

Slow and steady wins the race in the Med Aframax market, with owners making slow incremental gains week on week. First, WS130 became WS140 for a vanilla Ceyhan run a couple of weeks ago, then we had WS150. By the close of this week, we are entertaining WS160 levels, with charterers reaching further and further forward to secure well approved tonnage for trickier stems. Other markets remain stable or firm enough to maintain the fleet balance and with weather beginning to turn, Kirkuk volumes added to the mix and a perennially firm Suezmax sector in the background, owners are optimistic that the rise has not ended yet. Turning to the Black Sea, CPC cargos were concluded at WS160 levels in the middle of the week, with charterers aided by thin volumes and enough owners willing to fix them. However, with the rise in the XMed market rates, we would expect a firmer number to be concluded on this route next. As we look forward owners are expectant.

US Gulf/Latin America

The Americas VLCC market began the week under pressure, offering little support to global sentiment as freight levels remained in a vulnerable position. Fresh enquiry appeared slow to emerge across the Atlantic basin, though that soon changed after reports of several private deals being concluded really helped inject a degree of optimism, and sentiment soon was strengthened. With around 10 or so USG fixtures reportedly done across this week, it really has left an already tight position list in further short supply. Meanwhile, Brazil didn’t provide many talking points across the week. Freight levels had picked up 5 points on last done and now at the end of the week, activity stills remains limited but sentiment and rates have improved. With the tonnage list now less forgiving, any further uptick in enquiry will see rates continue on an upwards trajectory once we return to the fold next  week. Today we are calling USG/China $10.5m & Brazil/China at WS87.5. 

North Sea

A busier week in the NSea, with bad weather stirring up some replacement business and a tighter list creating opportunities. Owners are now eyeing up mid WS140s, with chances appearing here and there. More to come from next week.

Crude Tanker Spot Rates (WS)

Clean Products

East

Improved activity in the AG MR sector this week with the list beginning to tighten up on the front-end. For now, rates have remained flat all week with 35 x WS175 for TC17 & 35 x WS125 for TC12. Heading into the weekend, there are a handful of cargoes still looking for cover and as mentioned above with the list tighter, there is a feeling of optimism growing amongst owners. Potential for some small gains here.

UK Continent

When 30+ vessels appeared at the top of our tonnage list opening in the next 5 days, the MR sector was always going to be in a bit of bother. Rates have been under pressure throughout and despite a good number of WAF & South America runs being quoted, the lack of TC2 runs have been the real thorn in owners’ sides. As of now we are calling TA around 37 x WS105. A number of trickier cargoes to cover due to grade restrictions partnered with long delays ex Antwerp has thinned our lists out a little, but in reality this week has certainly been won by the chartering side and we look into next week to see where owners can rebuild. 

A few more cracks have appeared in Handy owners’ armour this week as the combination of slower enquiry and pressure from the bigger ships has resulted in freight softening. Owners are doing a good job at holding the line at 30 x WS150-155 for XUKC but with MRs now available for short-haul at 37 x WS115, it does feel like a correction could occur, otherwise Handies will get priced out by the cheaper MRs. The weekend break will enable a few more ships to firm up, so expected further supply available come Monday. Pressured.

Med 

After a rather dull and subdued few days, MR rates have jumped five points to the 37 x WS120 Med-TA mark. Owners have previously not wanted to jump the gun and were seemingly content with the 37 x WS115 levels seen but some regular enquiry gave them enough confidence in pushing for an extra 5 points. The list has looked relatively sparse which has also been a factor owners have been aware of to help push rates. Additionally, with USG/ TA rates strong, this has proved enough to maintain Med-TA levels. Looking to next week, if we see continued or improved enquiry then it is likely last done is achievable.  

A positive week for Handy owners in the Med. We saw rates rise from a new bottom of WS130 to 30 x WS150-155, where they sit now. A tight list and a wealth of enquiry have been the driving force behind this. Again we have seen an East-West divide in tonnage so load port is a factor owners continue to look at. Nonetheless, as we approach the weekend charterers have slowly  been presented with more options as a whole, which has potentially reduced the practicality in owners’ bullishness – hence why we have lingered at the WS150-155 mark for the last two days. If the list restocks healthy enough over the weekend, we could see some downward pressure start to build up next week and some potential corrections in rates. Alternatively, an injection of fresh cargoes will be what owners are praying for to maintain or hopefully improve current levels.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The North saw a quiet start to the week, with workable prompt units. Proceedings were kicked off with a prompt replacement at last done levels before a short period of quiet in the market. However, Thursday saw fresh enquiry enter the market, clipping away tonnage from the list and causing levels to firm up to the WS225 mark. The week has closed out with availability looking thin for cargoes in the next window, we expect to see levels soon firm up early into next week.

The Mediterranean started in a similar fashion to the UKC but with more prompt units in play and little enquiry. Rates began the week at WS210 before a period of quiet caused sentiment to soften. WS205 was fixed and repeated, with one fixture at WS200. Levels look set to hold for now, with next up tonnage clipped from the list.

MR

MRs in the North are in short supply but non USTR Compliant Panamaxes are joining in to bring some reprieve. A couple of dealings this week with 45xWS160 reported ex UKC marked a firming in rates. Owners will be hoping for more of the same moving forward.

Down in the Med the market saw a fresh test with level in and around the WS150-155 mark. Enquiry will need to surface early into next week if owners are to capitalise.

Panamax

A quiet week for Panamaxes overall, with under the radar fixing pushing up sentiment slightly higher, with TD21 printing a couple of points shy of WS150 on Friday evening. Owners will be hoping for more of the same as we head into 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 changeOct 9thOct 2ndLast Month*FFA Q4
TD3C VLCC AG-China WS-10728210180
TD3C VLCC AG-China TCE $/day-11,75059,25071,00094,50064,250
TD20 Suezmax WAF-UKC WS810698111114
TD20 Suezmax WAF-UKC TCE $/day6,00045,25039,25047,50048,000
TD25 Aframax USG-UKC WS8158150165177
TD25 Aframax USG-UKC TCE $/day3,00038,75035,75041,00042,250
TC1 LR2 AG-Japan WS-11108119112 
TC1 LR2 AG-Japan TCE $/day-3,50022,25025,75023,500
TC18 MR USG-Brazil WS-42222264219207
TC18 MR USG-Brazil TCE $/day-8,00030,25038,25029,25025,500
TC5 LR1 AG-Japan WS-9113122127127
TC5 LR1 AG-Japan TCE $/day-2,00015,75017,75019,00017,250
TC7 MR Singapore-EC Aus WS-9185194198191
TC7 MR Singapore-EC Aus TCE $/day-1,50020,75022,25023,00021,000

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

Bunker Prices ($/tonne)

wk on wk changeOct 9thOct 2ndLast Month*
Rotterdam VLSFO  +3437434455
Fujairah VLSFO  -5475480482
Singapore VLSFO  -3476479486
Rotterdam LSMGO  +5664659686

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