Kurdish Crude Recommences

Saturday saw the resumption of Kurdish crude flows through the Kirkuk-Ceyhan pipeline after a halt of two-and-a-half years, with initial flows set at 150-160 kbd. Already a tanker is on the berth at Ceyhan, loading Kurdish crude for the first time since the pipeline was halted. The pipeline was halted in March 2023 after Turkey was ordered to pay Iraq $1.5 billion in damages for unauthorised exports by the International Chamber of Commerce. Last week a deal was reached between Iraq’s federal government, the Kurdistan regional government, and foreign oil producers, breaking the deadlock. The crude will be sold using Iraq’s SOMO’s official prices and an independent trader will handle sales. As SOMO is handling the volume, it may mean there is no longer any barrier for owners to load both Kurdish crude at Ceyhan and Iraqi crude in the AG.

Exports of Kurdish crude from Ceyhan used to average over 400 kbd prior to March 2023, over half of which was carried on Aframaxes, with the rest carried on Suezmaxes. By far most of this medium sour grade crude was delivered into the Mediterranean region, with a varying share heading to Eastern Asia, depending on arb economics. The additional availability of crude in the Mediterranean may open arb opportunities to the East on Suezmaxes, adding to tonne miles. On the flip side, demand for Middle Eastern barrels may decline.

With volumes set at 150-160 kbd for now, significant headroom remains for further upwards increases, especially as the pipeline offers improved export economics for crude suppliers. Reportedly, SOMO is aiming for 400 to 500kbd of flows through the pipeline by 2026. Iraq has been a serial overproducer against its OPEC+ quota and a potential increase in production to facilitate higher flows through the Kirkuk-Ceyhan pipeline could lead to further breaches. However, some producers have said they have no immediate plans to resume exports through the pipeline. There is still $1bn in arrears owed to producers, and the oil companies involved are reported to be in the process of creating a mechanism for settling the outstanding debts.

The resumption of Kurdish flows through the Kirkuk-Ceyhan pipeline will come as welcome news to the Aframax and Suezmax markets. Suezmaxes have already enjoyed significant strength throughout the summer. In the West, Suezmax demand was supported by continued strong CPC exports, as well as growing volumes from Latin America, with open arbs to the East supporting tonne miles. In the East, higher OPEC+ volumes have provided support.

Aframaxes have recently traded at a sharp discount to the larger Suezmaxes and VLCCs. Various factors are impacting upon Aframax demand, as discussed in our recent report. The prospect of additional barrels and an uplift from the impending winter season should provide hope for owners that things are about to turn a corner.

Kurdish crude exports via Ceyhan (kbd)

Crude Oil

East

A rather negative week in the AG VLCC market, with activity remaining subdued and freight levels under persistent downward pressure. Despite early hopes of a pick-up ahead of Golden Week, enquiry has been limited, with cargoes drip-fed into the region and charterers benefiting from a wide pool of owners competing for AG/East runs at competitive levels. Public holidays in the Far East further slowed momentum, leaving sentiment weak and expectations tilted toward further softening. Owners will be hoping that once the holiday period concludes, fresh enquiry will emerge to restore some balance and flow to the market. Today we are calling AG/China & AG/USG 48.

The Middle Eastern Suezmax market has been quiet this week, and we have seen some pressure on rates. Charterers will be looking to break 140 x WS65 via C/C for Basrah/West today. There are a few ships keen for this run that are still free to work, and they are likely to be picked up at the start of next week. Rates to head East remain under pressure despite a prompt replacement achieving a good number earlier in the week. We estimate AG/East at around 130 x WS125 today but this market needs a fresh test.

Enquiries in Asia in the Aframax market emerged at a drip-fed pace and were swiftly covered at prevailing market levels, keeping the overall tone balanced. The week was relatively slow, leaving the market watching closely to see whether momentum can carry through or if a softer second decade will erode recent gains, with owners’ earnings hovering just below $30k/day. The tonnage list remains healthy for the natural fixing window, suggesting charterers may continue to test and beat index levels. Activity ex-Oz faced additional pressure from LR2 competition amid a weaker CPP market, which further dampened Aframax sentiment. We close the week with a touch of softness, assessing Indo/Oz at 80kt x WS125.

West Africa

The WAF VLCC market mirrored the AG this week, with activity remaining muted and fresh VLCC enquiry scarce. Freight levels eased, influenced by surrounding regions and only a couple of cargoes surfaced, including one fixed at WS80, which underlined the weaker sentiment and cemented the softer levels. With no fresh enquiry and owners showing willingness to follow the market, conditions remain under pressure, and charterers retain the upper hand. Today we are calling WAF/East WS79.

In WAF, Suezmaxes softened this week to 130 x WS97.5 for TD20. There’s still prompt tonnage around, but charterers are starting to hit some resistance, and owners are feeling that rates are unlikely to be pushed much lower. The premium to head east is around 10 points today, but we could see charterers put some pressure on those ships who have missed their dates in the AG and are ballasting on spec to West Africa.

Mediterranean

On Suezmaxes in the Med, TD6 as per usual has stayed very much under wraps but with a weaker West Africa market, charterers will expect to break below the much repeated 135 x WS142.5. Libya/Ningbo has remained quite inactive this week, and we estimate levels are around $5.2m but this is due a fresh test. 

The Med this week was on a sure footing with charterers reaching forward on dates to secure coverage and to keep a lid on aspirations.  A uniform WS152.5 was seen against healthy flats with the Benchmark Ceyhan run finishing the week slightly higher at WS147.5.  That said charterers can be forgiven for looking at this market questioning the validity of current strength as tonnage lists do show availability within the forthcoming window. But as often is the case the devil is in the detail.  Several itineraries have not been firm enough to work and with the complexity of the Med due to restrictions, vetting requirements and port delays this often means there isn’t a full contingent to choose from.

US Gulf/Latin America

The Americas VLCC market endured another disappointing week, with little fresh enquiry from either the USG or Brazil. Activity remained sparse, and sentiment mirrored other regions, with freight levels edging further downwards under mounting pressure. In Brazil, rates and sentiment were under pressure and rates have now stepped down by 12 points since last week, highlighting the softer tone. While in the USG enquiry has been limited a couple of cargoes were worked slowly and charterers were able to chip away at rates. This should now mean we could see improved activity with the pricing more favourable. Today we are calling USG/China $9.7M & Brazil/East WS77. 

North Sea

An interesting week for Aframaxes in the North Sea with some bad weather causing delays and hiccups pressuring rates and seeing them float upwards. Some switching at the end of the week has left charterers in a tricky position and given owners the chance to push for more. This has left owners in a safe position eyeing up the mid WS140s if they find the right opportunity. Further upsets expected over the weekend.

Crude Tanker Spot Rates (WS)

Clean Products

East

China’s Golden Week is well underway, but it has not slowed the LR markets. Both LR1s and LR2s have seen strong activity across AG and Far East this week. Rates held steady, with TC1 on subs at WS117.5–120 and westbound maintaining around $3.3m. LR1s eased during the first half of the week, but regained ground as a flurry of fixtures supported sentiment. TC5 found a floor, settling at WS122.5, west UKC runs sitting at the $2.7m levels but in need of a true fresh test. Owners will be hoping that come Monday stems make and early appearance and force rates to progress away from the floor.

A continued active week for the MRs in the AG, with enquiry holding firm and helping stabilise the market after last week’s rebound. TC17 has traded steadily in the WS175–180 range, while TC12 has held between WS127.5–130, with the other benchmark routes remain steady. We head into the weekend expecting the market to hold rather than make any significant moves.

UK Continent

Rates on MRs in the UKC are eclipsed by white hot USG rates, this is keeping the backhaul vibe going for TA runs, the Atlantic triangulation dream is alive and well. Rates on the UKC have been steady around 37 x WS125 TA. 145 to WAF and WS150 to Brazil. The list has remained a complicated mess of itineraries, but cargoes have picked through the tonnage quite steadily. There is some bad weather in bound over the weekend and more ships available as we go into the second decade so there are some push and pull factors ahead. There has also been some muted discussion about ballasting to the USG, but we haven’t seen any ships make the bold move yet. 

 A rather dismal week ends for Handy owners plying their trade in the UKC with limited fixing opportunities arising with their larger cousins, the MRs stealing the show. The lack of cargoes has given what few that have appeared the chance to make the most of the situation as the 30 x WS170 at the start of the week now turns into WS160, and with further testing could well see more knocked off the route. Some poor weather inbound may give a chance for some increased activity come Monday, but if this doesn’t come to much, expect another flat week ahead.   

Med 

Majority of the week has been quiet and inactive for MRs. Rates held at 37 x WS125 Med-TA mainly based on sentiment and a very strong USG/ TA market. However, at weeks end we have seen some fresh tests with 37 x WS115 go on subs. A lull in enquiry has been a key factor for rates slipping as tonnage has slowly restocked and charterers are presented with more options. Looking forward to next week, owners are hopeful a strong USG/ TA market can help pull rates into parity, potentially helped by some less than desirable weather forecast, depending how the list shapes up. 

Med Handy rates have fallen off a cliff this week, dropping 50 points and a new floor being reached at 30 x WS130 levels XMed. The main driver has been supply heavily outweighing demand. One comfort for owners is it seems we are at bottom levels so the only way is up, but the question is, when will this happen? With some bad weather forecast this may be the catalyst that owners need to lift rates off the floor. There is work still to be done come next week, however, regarding working through the list if rates are to bounce back or not.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Overall, it’s been a fairly positive week for owners in the North as enquiry has chipped away at the tonnage list. WS225 was tested and repeated a handful of times. One fixture at WS220 was more of an anomaly off prompt dates, with minimal ballast, which we feel won’t have an effect on the market going forwards despite being last done. There are a handful of vessels opening over the next couple of days both naturally placed and North Spain, but modern tonnage is overall thin on the ground if relets go own programme. We expect to see WS225 repeat with a view to firm should enquiry get off to a fast start.

This past week has been positive for Handy owners in the Med as enquiry flowed early clipping tonnage from the list, with rates firming from WS190 to highs of WS212.5. A couple of prompt cargoes struggled for cover and owners took advantage. We saw WS222.5 on subs before failing soon after before fixing back down at market levels, highlighting the lack of availability at one point. As usual it was a quieter end to the week but owners here still feel bullish. We expect to see a tight list on Monday as tonnage toward the top of the list has premium history or is of an older vintage. We expect to see vanilla X-med rates to repeat a couple of times before firming further, should activity get off to a fast start.

MR

MR cargoes have been hard to come by across both regions this week as Handy enquiry dominates. One fixture in the north was seen at WS150 for a run down to the Med (equivalent of WS155 XUKC). Tonnage is tight and we expect owners to kick on towards WS160 if given the chance. The Med has gone all week without a fresh test basis 45kt but this could be in part driven by a consistent tight supply of tonnage. We expect levels to be tested at around the WS155-160 mark on next done.

Panamax

TD21 has been sluggish this week as enquiry struggled to surface. Charterers gained the upper hand and begun to test levels down to the WS135 mark. We could see rates continue this trend down early into next week. The flat feel remains in Europe as tonnage slowly trickles in. Back haul runs TA stay few and far between for now as the market awaits a fresh test, WS115-120 stays for now.

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 2ndSep 25thLast Month*FFA Q3
TD3C VLCC AG-China WS-19821017073
TD3C VLCC AG-China TCE $/day-23,50071,00094,50055,50055,500
TD20 Suezmax WAF-UKC WS-1398111108111
TD20 Suezmax WAF-UKC TCE $/day-8,25039,25047,50045,75045,250
TD25 Aframax USG-UKC WS-15150165164173
TD25 Aframax USG-UKC TCE $/day-5,25035,75041,00040,50040,250
TC1 LR2 AG-Japan WS7119112157 
TC1 LR2 AG-Japan TCE $/day2,25025,75023,50038,750
TC18 MR USG-Brazil WS45264219216201
TC18 MR USG-Brazil TCE $/day9,00038,25029,25028,75024,250
TC5 LR1 AG-Japan WS-5122127158140
TC5 LR1 AG-Japan TCE $/day-1,25017,75019,00026,50020,250
TC7 MR Singapore-EC Aus WS-4194198213190
TC7 MR Singapore-EC Aus TCE $/day-75022,25023,00025,50020,750

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

Bunker Prices ($/tonne)

wk on wk changeOct 2ndSep 25thLast Month*
Rotterdam VLSFO  -17444461452
Fujairah VLSFO  +1485484484
Singapore VLSFO  +7487480490
Rotterdam LSMGO  +26677651658

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