MRs in focus

The conflict in Iran concludes its eighth week and tanker markets are adapting to the new reality. In the East, clean exports are so far this month averaging the lowest levels in over a decade, in large part due to nearly inexistent exports from the Middle East Gulf (MEG), but also due to a lack of feedstock, especially for Asian refiners, alongside protectionist policies barring exports from some countries. In contrast to this, West of Suez clean exports are near record monthly highs.

The MR market is proving to be quite resilient to the loss of volumes in the East, recovering from a significant drop in earnings a few weeks into the Iran War. As mentioned in last week’s report, high versatility and a lower dependence on the MEG market has helped to insulate this size. Since the war, clean volumes carried on MRs have shrunk but have been far less impacted than LR2s in particular. Earnings have even increased in recent weeks here, as low vessel resupply, high bunker prices, and volatile arbs have kept rates supported. Freight rates on the route to Australia, the country with the highest per capita consumption of diesel globally, have been especially strong due to the aforementioned factors.

In the West, a significant number of MRs were taken out of the Atlantic Basin for a prolonged period, and consequently, the trend of this size class moving West has slowed down and even reversed slightly in recent weeks. We now see just over 30 MRs more positioned in the West than prior to the war (around 2% of the mainstream fleet). US diesel arbs to Europe, West Africa, and Latin America are currently open, and whilst being volatile, have been supportive of exports. The West African market has also been pulling MRs south from the Mediterranean, with freight rate differentials between UKC to the US Atlantic Coast and UKC to West Africa at over WS150 over the last couple of days. This comes as the Dangote refinery is seemingly firing on all cylinders, with total exports from the refinery at 440kbd so far this month, 60% of which on MRs. Export volumes in Northwest Europe have so far stayed strong.

So, what is the outlook for MRs? In the West, in the near-term the market is poised to remain robust, especially in the US. The most recent EIA data shows diesel stocks continuing to draw in the US Gulf, keeping exports near record highs. Whilst inventories so far remain rangebound in PADD3, exports can’t continue at this pace forever. The US administration has today extended the Jones Act waiver for another 90 days; a factor which may be very mildly beneficial to MRs. Across the pond in Northwest Europe, extremely high prompt prices for oil are impacting upon refining margins, possibly weighing on runs and consequently exports. So far, exports here have been holding up well, and with gasoline inventories at healthy levels could remain supported in the near term. However, there are reportedly just six weeks of jet fuel stocks left in the ARA hub, and demand destruction efforts are kicking in with a significant number of flights cancelled. Total CPP stocks in ARA are now at a 12-year low, hinting at significant strain on the system. Refineries have in some cases postponed maintenance to run hard and capture very high margins, making outages more likely, and in any case eventually turnarounds will have to be carried out. Most arbs still incentivise CPP to move East, making it more difficult for vessels to position themselves to the West, despite the large earnings differential. This is further exemplified by the differential in TC rates for chartering an MR in the East compared with the West, with western vessels earnings around $6,000/day more for 1-year charters.

In the East, as has been repeated ad nauseam, if this conflict continues, more refineries will run low on feedstock, and CPP exports will continue to decline, weighing on the market. The news of a renewed US sanctions waiver for Russian crude, and consequent increased crude imports into India and Southeast Asia may keep refining runs here maintained to some degree. In case of a normalisation of trade by the middle of the year, the IEA doesn’t see Middle Eastern refining runs return to pre-war levels in 2026, and the rest of Asia will only recover by Q4. Trade inefficiencies and vessel repositioning will remain supportive factors, but the lack of physical flows will provide continuous downward pressure and a negative outlook for this market so long as Hormuz remains closed.

MR positioning (no.)

Crude Oil

East

The AG and Red Sea VLCC market remained volatile this week, with activity fluctuating and overall sentiment driven by developments around the Strait of Hormuz. While some cargoes were quoted both inside the AG and out of Yanbu, uncertainty over transit kept fixing limited at times, leaving rates in the Red Sea broadly sideways. Mid-week saw a pickup in activity, with fixtures reported around WS170, although freight softened slightly as tonnage availability remained healthy with a number of prompt ships still seeking employment. Toward the end of the week activity slowed again, with rumours of deals below last done and a growing list suggesting pressure could build, even as geopolitical risks continue to support upside potential.

The Suezmax East market remains notably quiet as the continued closure of the Strait of Hormuz makes it very difficult to put together AG cargoes. All eyes remain on the region, with the potential for it to open at any day keeping owners optimistic, even though realistically very little progress appears to be being made.

The Asia Aframax market saw limited encouragement this week, with indices easing for the first time in over a month and earnings closing around $63,000/day. The Indo list has begun to open for first-decade May, partly due to tonnage returning from both east and westbound runs. Looking ahead, some pickup in activity is expected next week as market participants position ahead of Chinese Golden Week, a period that typically prompts early coverage from both charterers and owners. We close the week on a softer note, assessing Indo/Up at 80kt × WS260.

West Africa

The WAF VLCC market remained largely quiet throughout the week, with limited visible activity on the surface. The tonnage list stayed relatively well supplied, while only a small number of cargoes were reported seeking coverage. Freight levels held broadly steady, although a lack of fresh enquiry left the market struggling to establish clear direction. A fresh test will be required to properly gauge levels, with owners likely to look to repeat last done should activity pick up.

Suezmaxes in WAF have firmed in the latter half of the week and, with a more active Americas market, sentiment is strong with owners looking to push above 130 × WS220 today. The market remains heavily reliant on ballasters from the East, making Angola cargoes look increasingly attractive. Expect some pressure on these runs as owners look to avoid ballasting past potential load areas.

Mediterranean

Ebb and flow in the Med for Aframaxes this week with a fair bit of testing. Activity has picked up and most now feel the market has bottomed and stabilised. Looking ahead, a calmer period seems likely in the near term. WS290 appears to be the number for a decent Libya flat rate at the moment, with some trickier ports paying a touch more. Most are happy to take this for now and assess where the value is in the medium term. Some smaller volumes are expected from Sidi, so likely less triangulation of runs up to the Baltic. The overall feeling remains steady.

The Suezmax CPC market is showing some strength this week, with owners feeling the market has bottomed at WS230. Healthy volumes and some fixing seen ahead of the natural window suggest charterers share this assessment. The Med/East run remains untested this week, with the arb for sending crude East not looking particularly attractive. Hypothetically, Libya/Ningbo today we estimate at around $11m via Suez, with a similar rate likely for those willing to work on a Cape-only basis.

US Gulf/Latin America

The States VLCC market experienced a subdued week, with limited enquiry and little visible activity. Freight levels eased slightly early on before stabilising, as a steady flow of ballasters from the Atlantic kept the list well supplied. As the week progressed sentiment remained cautious, with charterers slowly beginning to look at June coverage. The market closed on a quieter note, with owners now looking for a pickup in enquiry next week to help establish clearer direction.

North Sea

On Aframaxes, what started as a rather turbulent week has settled down to a more balanced position, with the market finding its equilibrium. WS230 has been repeated several times, with most happy to take last done and move on. There is still some draw from the States, but ample tonnage is kicking around to cover requirements for the current window. After the recent rollercoaster of rates, things feel settled, and the boat looks unlikely to be rocked in the near term.

Crude Tanker Spot Rates (WS)

Clean Products

East

On the LRs, the situation remains similar to that of the past six weeks. There has been no real movement within the AG, a few ships managed to slip out over the weekend, but this proved short-lived as the blockade was reinstated. A number of vessels continue to hold position off the HRA hoping to pick up a stem, though at present these stems are slim pickings. Everyone continues to hope for an improvement in the political situation.

Activity has picked up this week, with a fair amount of testing on TC17 ex-Sikka. Rates have edged up from around WS360 to WS375, with Sikka remaining the preferred loading area. Overall sentiment in the AG remains cautious given ongoing geopolitical uncertainty, despite the US-Iran ceasefire holding. A brief reopening of the Straits allowed some movement, though confidence quickly faded thereafter.

On the MRs, eastbound levels are holding near WS300, while Cross-AG has stabilised in the $2.2m-$2.4m range. Westbound remains quiet with no stems out of Sikka, though two cargoes emerged from the Red Sea, with Red Sea/Med reported on subs at $1.9m-$2.0m for both East and West Med. On shorter eastbound runs, Sikka/Colombo is seen on subs around $1.0m. The list is starting to build slightly, but with fundamentals largely unchanged and uncertainty still present in the AG, the market is expected to remain steady in the near term.

UK Continent

On MRs, it has been a slower week has cast a slightly calmer mood across the market. Long-haul East demand seems to have petered out as localised demand has become more paramount. TA is still very much the golden ticket round-trip option, although the WAF and Brazil differentials remain adequately wide to offer some good returns. Short-haul still makes a great backstop for owners looking to clean up cargo history, complete a SIRE or simply kill some time, and we have seen one deal on subs UMS ARA to the Red Sea, so there are still some interesting arbs at play. The general expectation from most is for a little more softening going forward, with bad weather, ullage and export volumes all having eased, giving the market a slightly less panicked feel.

Once again a positive week draws to a close for Handy owners in the North. TC23 has traded around 30 × WS505 throughout, with the odd fixture achieving less due to last cargo non-CPP, and there has also been good demand direction Med with 30 × WS495 paid and 30 × WS487.5 later in the week. A few MRs have been fixed for short-haul as owners looked to keep their steel moving, though it does feel that Handies are almost at the mercy of the MRs and whether they decide to compete on the 30kt clips or not. The Handy list still lacks depth, though this has been the scenario for some months now, with owners remaining bullish.

Med

General MR sentiment seems to have very much passed its peak, and whilst differentials remain blown wide open, the core base rate has started to show signs of easing. We have seen runs in most directions this week, but with some short-haul voyage options being declared, the tonnage list has provided some relief, as has ullage ashore seemingly becoming quite free as the crisis in the East grinds on. The relationship with the USG market remains a dynamic one as rates push then ease, though for most it remains the most desirable voyage, with the States’ resilience looking set to last.

An active week for Med Handies, with owners managing to keep the pressure very much on. The only real threat to the ongoing success they are enjoying is the larger-cubic MRs, which have started to encroach as the earnings on offer are very attractive. If this continues into next week and the tonnage list bulks out a little further, rates are likely to top out in the mid-WS500s. Weather delays have eased considerably and next week is looking reasonably calm.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Another strong week for owners in the North, with ships clipped away early from the list and levels steadily firming up to WS430, showing little sign of this trend reversing. A lack of naturally positioned vessels shared amongst few owners, combined with a consistent flow of cargoes, is the main driver behind this. We expect more of the same next week as we move into a new set of dates, with owners looking to build toward WS335-340.

The Med saw another steady week, with deals continuing to repeat at WS415 for the most part despite a quieter feel early on where levels could potentially have been tested down to WS410. Owners held the line before WS420 was tested on subs toward the end of the week. Whether this new level can hold remains to be seen, with replenishment set to restock the list over the weekend.

MR

A quiet week for MRs, with the majority of enquiry coming by way of Handy stems and part cargoes. In the North, naturally placed and WMed tonnage remains thin on the ground, with a fresh test still needed. We expect levels to be tested toward the WS350 mark when next called upon. It is a similar story in the Med, where a fresh test is required but tonnage is available in the next fixing window, skewing toward CMed and EMed. This should be sufficient to support last done levels at WS340.

Panamax

A quiet week for Panamaxes in the UKC and Med, with some background questions though enquiry has yet to firm up. Ideas hold around WS220 for a theoretical UKC-TA run, though as Aframaxes soften, Panamaxes would need to be priced some 60 points lower to remain competitive against them in practice.

TD21 has seen a relatively steady week overall, with off-market dealings employing ships. Levels have eased due to recent pressure from surrounding markets, though as Aframaxes in the region begin to tick upward, Panamax owners will be hoping for a boost in their wake.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

TD3C VLCC AG-China WS-8459467366378
TD3C VLCC AG-China TCE $/day-8,750489,250498,000376,000388,750
TD20 Suezmax WAF-UKC WS14206192413217
TD20 Suezmax WAF-UKC TCE $/day8,25097,50089,250229,75097,000
TD25 Aframax USG-UKC WS8354346761368
TD25 Aframax USG-UKC TCE $/day2,500100,50098,000253,75099,750
TC1 LR2 AG-Japan WS-32557589412 
TC1 LR2 AG-Japan TCE $/day-10,750162,250173,000111,000
TC18 MR USG-Brazil WS-164494659615433
TC18 MR USG-Brazil TCE $/day-29,25069,25098,50091,00055,000
TC5 LR1 AG-Japan WS36657621424434
TC5 LR1 AG-Japan TCE $/day8,750140,250131,50081,00083,500
TC7 MR Singapore-EC Aus WS7386380315289
TC7 MR Singapore-EC Aus TCE $/day1,00047,75046,75034,00031,500

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

Bunker Prices ($/tonne)

Rotterdam VLSFO  +39684645698
Fujairah VLSFO  +25752726900
Singapore VLSFO  -45713757853
Rotterdam LSMGO  +412261,2221,166

Print the report