No Margin for Error

US refinery maintenance typically peaks in October, a season that has historically weighed on freight. This year appears different with very little currently confirmed for the autumn, as robust margins keep refiners from taking units offline. Last week, US refinery utilization clocked in at 97.4%, the highest level since 2018. This dynamic should keep product tankers well supported across the US Gulf through Q4.

The only confirmed turnaround on the PADD 3 slate is Exxon’s Beaumont facility, covering an FCC and at least two hydrotreaters, running for roughly 45 days from early December to mid-January. With FCC work this thin, PADD 3 gasoline exports should stay elevated into Q4.

Distillates look similarly well supplied. The October–November CDU maintenance block that would typically weigh on the market is largely absent this year. PBF has pushed Chalmette’s CDU and coker into 2027, and CITGO has done the same with the Lake Charles coker. Valero, meanwhile, has guided Q3 Gulf Coast throughput to a robust 1.78–1.83 mbd.

It is worth noting that not all maintenance schedules are reported and some units may opt for lighter works this year given prevailing commercial conditions. Notably, the IEA maintains the view that October refining runs in North America will be lower than August at 18.8 mbd vs 20.5 mbd – about 8% lower with a recovery into November at 19.5 mbd.

For freight, the impact on both the short-haul USGC to Latam and USGC to Europe trades look limited given prevailing fundamentals. The thin turnaround slate should cap Q4 disruption, though it likely just pushes deferred maintenance into 1H 2027. In the meantime, light USGC maintenance and continued export flows should keep the USGC–Europe diesel arbitrage workable for longer than usual, while sustained high Gulf Coast runs support export availability and pressure import parity into Latam.

The main risk to this outlook isn’t scheduled downtime but unplanned outages. Deferred maintenance leaves the system running near full utilization with little spare capacity to absorb disruption, and Atlantic hurricane season runs through 30 November. This year’s El Niño conditions should help as they typically suppress storm activity.  However, there is still a non-zero percent chance of disruption this season and will remain a key source of concern.

At the same time, tightening restrictions on Panama Canal transits and the possibility of a further deterioration in conditions could cause a spike in USG to WCSA rates. WCSA is highly dependent on the USG for the majority of its CPP imports, with limited alternative suppliers. therefore, the combination of Panama distribution leading to tighter product tanker availability alongside supportive product trading economics could create very bullish sentiment on this trade. This would likely help to support other routes within the region as the impact of the disruption spreads and alternative trades price up.

There’s also the question of when this deferred maintenance eventually lands, since freight is likely to feel it. Pushed out far enough, it could mean a heavy works period in early 2027, though refiners may manage this by phasing individual units rather than taking whole sites down at once. That phased approach hinges on margins staying strong into the new year, which is plausible but not guaranteed. Either way, the underlying reality doesn’t change: a considerable slice of US refining capacity will need maintenance eventually, and the impact on the product tanker market when it comes could be significant.

Similarly, PADD 3 and PADD 1 diesel inventories are at historically low levels with local demand likely to rise in the coming months. This could limit the volume of distillate available for export, especially if domestic pricing increases, with the US mid-term elections due in November, domestic pricing could come into focus given its political sensitivity. Therefore, both diesel arbs and export volumes could face a ceiling, limiting upside potential here.

A wildcard in this analysis is Russia. Restrictions on Russian CPP exports remain in place, and while there’s talk of an easing as early as September, nothing is confirmed. Continued disruption would bite hardest in South America, where the planting season is set to lift diesel demand, a gap USG barrels are well placed to fill. That could keep TC18 arb economics firm, to the benefit of MRs on the route.

Overall, PADD 3 refiners look set to run hard into year-end, supporting both gasoline exports and the transatlantic diesel arb. The risk to watch isn’t the maintenance calendar, it’s an unplanned outage hitting a system with little spare capacity to give. In short, there is no margin for error.

PADD 3 Refinery Utilization Rates (%)

Crude Oil

East

The AG/Red Sea VLCC market started the week firmly, with early activity and fixtures above previous levels giving confidence to owners and putting upward pressure on freight. As the week progressed, rates appeared to find some resistance, with fixtures suggesting the market may have reached its ceiling. Some activity continued under the radar during the week, while the tonnage list remained relatively balanced. The market closed the week steadily, with fresh enquiry and the next round of fixtures needed to provide clearer direction.

The AG Suezmax sector remains heavily influenced by the political backdrop, with trading conditions continuing to be assessed largely on a case-by-case basis. Geopolitical considerations remain central to both owners’ appetite and charterers’ options, making the market difficult to benchmark and keeping rate ideas highly dependent on individual voyage and counterparty dynamics.

The Asia Aframax market ends the week relatively quieter than in recent weeks, though rates remain firm as recent chartering activity, including under-the-radar fixing, kept tonnage thin and sentiment supported. TD14 gained around WS10 points over the week, with Indo TCEs now in the low-$40,000/day range. A fresh test will be needed to determine whether current levels can be sustained as short-haul tonnage begins to replenish, and if charterers continue to seek coverage for 2nd decade requirements. Across the Pacific, TMX stems barely surfaced and freight remained flat, prompting more northern tonnage to ballast south in search of better earnings and activity in the region. We close the week steady, assessing Indo/Oz at 80kt × WS195.

West Africa

The WAF VLCC market opened the week on a firm footing, supported by strong Atlantic activity and limited prompt tonnage availability. As the week progressed, freight gradually eased as the wider Atlantic market softened, despite some tonnage being taken off the list. Activity remained relatively limited towards the end of the week, leaving owners looking for a fresh pick-up in enquiry to provide support and potentially rebuild momentum.

Suezmaxes in WAF have remained relatively quiet overall, with limited fresh enquiry struggling to absorb the available tonnage. There has also been little support from the USG/Atlantic market, which remains subdued in its own right, leaving the wider basin lacking the momentum required to establish any meaningful resistance to the softer trend.

Mediterranean

For Suezmax tankers in the Med/Black Sea, the CPC market has corrected substantially from recent highs, with a lack of sustained activity allowing an increasingly comfortable tonnage list to weigh on sentiment. An easing in Ukrainian attacks has also removed some of the geopolitical premium previously supporting the market, leaving charterers firmly in control and rates continuing to face downward pressure.

A busy start to the week in the Mediterranean had Aframax owners hoping for better days. A significant amount of fixing allowed the tonnage list to thin, and rates for vanilla cross-Meds tiptoed upwards from WS260 levels up to WS265 (this level being concluded for long Sidi voyages and standard Ceyhan runs). As the midweek mark was passed, though, activity dried up unexpectedly, given the impending bank holiday. Owners are now casting a glance at the States market and not seeing a much better scenario to depart for. Given this, we would be forgiven for thinking discounts could be afoot, though a keen eye will still look at the tonnage list and a collection of ports offering uncertain turnarounds (Trieste, Cartagena, Sarroch, Milazzo, Genoa amongst others) and conclude that we may not see a huge correction any time soon.

US Gulf/Latin America

The States VLCC market started the week at strong levels, following the previous week’s surge in enquiry and tightening tonnage availability. However, sentiment gradually softened as failed deals and subsequent fixtures began to put downward pressure on freight, particularly out of Brazil. Owners also appeared increasingly willing to lock tonnage away on longer voyages, adding to the correction. The market ends the week on a softer note, with fresh enquiry needed to determine whether rates can stabilise or face further downward pressure.

North Sea

After a promising start to the week, rates didn’t have the legs to go where they were expected. The local market was already playing catch-up, and subsequently rates in the US and other parts of Europe helped cement the short-term gains that were made. Levels ended the week back closer to WS200, with little optimism looking into the short week ahead. We think the market will slow for now.

Crude Tanker Spot Rates (WS)

Clean Products

East

It was a very busy week in the Far East, with rates climbing sharply, but in contrast the Middle East has seen a real drop in volume, though it’s likely to be temporary. LR1s had been lagging behind the LR2s, with TC5 (ex Sohar-Sikka) needing a boost, which we saw at the start of the week with WS280 paid and WS300 talked. After the quiet few days this has dropped back to WS275. 60kt jet Sikka/UKC is settled around $4.5m after an initial push by owners. Loading within the AG has seen a full range depending on dates, with up to WS800 paid!

LR2s were already firmer, so have remained fairly flat around WS270 for TC1 (loading STS Sohar). Sikka/UKC rates were pushed to $6.5m but look likely to drop back slightly to $6.0m now. But both sizes could see another push in the coming week once public holidays are over and September volume starts to push on.

A busy week for the MRs in the AG/WCI region comes to a close, with rates around 70+ points higher than this time last week. We began the week with a jump on Sikka TC17 up to 35 × WS310, and since then rates have pushed on ever since. Consistently strong cargo enquiry has seen the tonnage list slim, with this week’s availability considerably low compared to the three-month average.

We have also seen an uptick in east- and west-bound cargoes, with fresh positive corrections seen on all routes. X-AG runs remain active, with the list tightening and rates now pushing towards the mid-high $1m levels. Red Sea action has been ticking over under the radar, with rates holding steady for now.

To end the week, reports of 35 × WS370 achieved ex Duqm for TC17 will keep owners’ ideas bullish as we head into the long weekend. At the time of writing, only a few cargoes remain outstanding, but with the list tight on the front end and surrounding markets also firm, expect this upwards trajectory to continue.

UK Continent

Whilst there has been a slight increase in activity this week, the number of short-haul deals is really only compounding the tonnage build-up and thus delaying any change in rates. 37 × WS100 is still the going rate for TC2, although that does depend a little on the forward earnings curve in the USG. We have seen some units ballast away from the UKC this week, but that trend does seem to be slowing down a little due to Atlantic weather and market dynamics. Cross-UKC rates sit at 37 × WS145 and active; we have seen a good variety of deals this week, with $1.475m concluded into the Red Sea, WS170 fixed down to WAF ex UKC, and WS180 ex the Baltic.

This sector would no doubt be sitting comfortably in the 200s if the constant threat of lonely MRs stealing the 30kt clips had disappeared. Alas it hasn’t, and charterers continue to quote 30-37kt sized moves for the XUKC and UKC/Med runs, and the few handies that are around have quickly picked those off at the now improved 30 × WS180 mark. Expect this market to remain firm due to the lack of tonnage, but remain undervalued with the constant blanket of MRs available.

Med

The Med has been slow this week, and with laden tonnage aplenty, rates remain dire for earnings. The short-haul fixing and laden tonnage from the north does not spell any change, especially next week, as we expect a lengthy list come Tuesday. TA is going circa 37 × WS110, cross-Med circa 155, and for those looking to exit the region, WAF at WS150. Some seasonal weather change and an uptick in cargo count will see this market ease out of the doldrums, but we are not there yet.

A rather uninspiring week comes to a close here on the Mediterranean Handies, with 30 × WS165 being fixed throughout for the XMed run. With a long weekend around the corner, we expect the tonnage list to restock, and moving ahead it seems unlikely we’re going to see any positivity any time soon… flat to calm ahead.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The week began with a replenished pool of workable, naturally placed tonnage, resulting in softer sentiment and expectations of rates easing from WS340-345. As the week progressed, naturally positioned availability remained plentiful, with charterers applying downward pressure and rates softening to around WS327.5-332.5. By week’s end, reported fixtures continued to trend lower as the softer tone persisted, with levels closing the week around WS315-320.

Following the weekend, the list appeared well padded, offering charterers options across multiple regions. With expectations for a slower start to activity, sentiment was anticipated to soften towards WS360-365. As the week progressed, a steady flow of relets entered programmes, but availability remained healthy, resulting in levels around WS352.5-357.5. Heading into the weekend, reported fixtures continued to edge lower, with charterers maintaining pressure on owners and rate ideas moving towards WS335-340.

MR

The week started quietly, with limited activity and a growing number of naturally placed units opening towards month-end, leaving rates in need of a fresh test around WS270-275. As the week progressed, MR stems began to surface, though the level of workable tonnage left charterers with sufficient options, putting pressure on owners’ expectations and bringing sentiment towards WS260-265. As the week draws to a close, despite reports of MR stems, fixture details remain limited. Nevertheless, sentiment is expected to soften in line with the Handy market, leaving rates to be tested around WS255-260.

The week opened with MR availability spread across a variety of dates and loading areas. While a market test was needed, level expectations were around WS275-280. As the week progressed, rate sentiment softened as workable options continued to emerge across the Med, leading to ideas around WS260-265. To close the week, MR availability remains healthy, and, despite limited fixture visibility, rates are expected to continue testing around WS260-265.

Panamax

Panamaxes started the week increasingly concentrated on forward dates, with owners already securing employment into the CBS-USG market. For UKC-USG, levels around WS185-195. As the week progressed, availability became more weighted towards the Med, while firmer Aframax rates provided underlying support to sentiment. Despite this, levels remained largely unchanged. By week’s end, little reported activity had surfaced, although owners continued to favour securing employment into the USG market. Sentiment remains steady, with rates holding around WS185-195.

The week began on a firm footing, with cargo volumes continuing to flow and tonnage remaining tight, supporting levels around WS480-485. As the week progressed, the market appeared to reach a peak, with rates beginning to soften in line with surrounding sectors and expectations easing towards WS475-480. By week’s end, activity had slowed further, resulting in levels around WS455-460. Despite the correction, returns remain attractive enough to continue drawing ballasters from other regions, although owners may look to secure employment before any further downside emerges.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeAug 27thAug 20thLast Month*FFA Q3
TD3C VLCC AG-China WS53623570424495
TD3C VLCC AG-China TCE $/day64,000678,500614,500446,250523,250
TD20 Suezmax WAF-UKC WS-91238329222237
TD20 Suezmax WAF-UKC TCE $/day-57,500117,750175,250107,500109,500
TD25 Aframax USG-UKC WS-126202328375296
TD25 Aframax USG-UKC TCE $/day-46,75043,00089,750108,00072,000
TC1 LR2 AG-Japan WS3540537497 
TC1 LR2 AG-Japan TCE $/day2,250155,500153,250140,250
TC18 MR USG-Brazil WS-19262281346264
TC18 MR USG-Brazil TCE $/day-2,75030,00032,75044,50027,500
TC5 LR1 AG-Japan WS14579566519496
TC5 LR1 AG-Japan TCE $/day4,500120,500116,000104,75097,750
TC7 MR Singapore-EC Aus WS53315262269263
TC7 MR Singapore-EC Aus TCE $/day9,75035,00025,25026,50025,500

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

Bunker Prices ($/tonne)

wk on wk changeAug 27thAug 20thLast Month*
Rotterdam VLSFO  -13661674683
Fujairah VLSFO  -37792829810
Singapore VLSFO  -44770814803
Rotterdam LSMGO  -8412001,2841,297

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