OPEXIT

Earlier this week, the United Arab Emirates (UAE) confirmed its exit from OPEC. Whilst an exit had been mooted before, the timing of the announcement surprised many given the ongoing Middle East war. With Hormuz effectively closed, and oil production shut in across the region, Abu Dhabi’s announcement will not impact oil markets today. However, in the long term, oil prices, production and tanker demand could all feel the impact.

In isolation, one country leaving OPEC does little to change the outlook. Questions are being asked as to whether the influence of the group has been reduced, yet OPEC will still control around 30% of global oil supply (48% with OPEC+ members), enough to influence supply and with that, pricing. The key question however is; do other notable members follow suit or is this an isolated exit?

In the current market, OPEC quotas are largely irrelevant. However, just a few months ago, the oil market outlook looked very different with OPEC staring at a substantial market surplus following the unwinding of production cuts and rising Atlantic supplies. By 2027, members would have been forced to either cut production or accept lower oil prices; something which could have caused substantial friction amongst members. Instead, oil balances have been flipped entirely, with the market potentially staring at a historic deficit amid rapidly depleting inventories. On a temporary basis, these market dynamics give the UAE, OPEC and producers in the Atlantic scope to continue ramping up production independently, reducing the need for coordinated production policy. As such, it may be a few years before we see the leaner OPEC’s ability and willingness to balance the market being tested.

So, what does this all mean for tankers? Firstly, the UAE will export more. In February, the Emirates 3.4mbd, yet it is widely reported that the country’s production capacity is now as high as 4.8mbd, rising to 5mbd by next year. As such, the country could export around 1.5mbd more once the War ends, subject to the condition of fields and export infrastructure. In the short term, the market can probably absorb those additional volumes alongside increases elsewhere, yet on a long-term basis, supply and demand will need to find a balance meaning that OPEC, or someone else, will need to make way. If the remainder of OPEC are unwilling, the burden will fall on higher cost producers with flexible production i.e. the United States. Lower US output at the expense of higher Middle East exports would ultimately limit the growth in tonne miles given shorter voyages to Asia, yet there would still be tonne mile gain. In an extreme scenario where OPEC fully disbands, oil markets could become more volatile, with output decisions being driven by the production economics and strategies of individual producers, rather than at government level.

With the impact of the decision today being masked by war, the tanker markets will have to wait and see what the real impact is. Yet ultimately, we expect the burden of balancing oil markets to ultimately fall to either US shale, or OPEC, as has been the case for the past decade.

OPEC crude production (mbd)

Crude Oil

East

The AG and Red Sea VLCC market started the week quietly following last week’s activity, with few visible fixtures and some tonnage taken privately. Freight began to soften after a deal was concluded below last done, giving charterers willing to apply downward pressure some encouragement as tonnage lists remained healthy. The UAE’s announcement of its withdrawal from OPEC brought some added interest to the region, with the prospect of higher volumes in the coming months. Mid-week saw small pockets of activity, including a PTT quote, though rates largely stabilised after the earlier dip. Toward the end of the week activity remained limited, with freight holding around WS145 for Yanbu/East runs and tonnage availability still comfortable, keeping pressure on rates.

In the Arabian Gulf for Suezmaxes the geopolitical backdrop remains largely unchanged. However, movements in oil prices and futures markets suggest participants are increasingly pricing in the potential for further escalation before any resolution. From a spot market perspective, charterers continue to demonstrate a preference for routing cargoes outside the AG where feasible, reflecting ongoing caution and risk management.

The Asia Aframax market remained muted at the close of a shortened week, with most participants writing it off amid sluggish demand. The anticipated pre-holiday rush failed to materialise, with a handful of offers reportedly surfacing for a regional cargo. TD14 fell for an eighth consecutive session, printing WS240.25, weighed down by a lengthening tonnage list. With Chinese Labour Week approaching, the main test for long-haul demand will likely be the return of Australian-bound stems, which have been notably absent of late. Overall sentiment has softened, with adjacent markets also correcting lower, notably Vancouver where mid-to-high $5m freight Eastbound had been achievable prior to the recent correction. The spread between Atlantic and Indo earnings may still encourage owners to ballast on spec, as returns and activity levels remain comparatively more attractive in the West. We close the week on a softer footing, assessing Indo/North at 80kt × WS250.

West Africa

The WAF VLCC market remained quiet throughout the week, with limited visible activity. Early fixtures suggested slight downward pressure from the Atlantic, though rates later stabilised as the tonnage list stayed relatively balanced. Activity in Brazil helped maintain levels, but overall enquiry remained thin. The week closed with steady sentiment, as low volumes and limited fresh cargoes kept freight largely unchanged.

Suezmax activity in the West Africa market remained subdued this week, further weighed down by a lacklustre performance in USG business. Fresh stems were notably limited, while a steady build-up of tonnage within the basin combined with an influx of ballasters from the East placed downward pressure on rates. TD20 levels have now slipped below WS200, and owners will be looking for a more positive shift in fundamentals and demand heading into next week.

Mediterranean

The Suezmax CPC market emerged as the primary area of strength in the West this week. A busy loading programme, supported by consistent cross-Med and Med/East enquiry, underpinned firming sentiment. Demand for CPC cargoes remained robust, with incremental rate improvements observed as the week progressed. Tonnage availability stayed relatively tight, particularly as end-of-month stems approach, helping to maintain upward pressure on rates.

The week began on a firmer footing for Med Aframaxes, with only the sudden berthing of a few extra ships in Trieste easing the stress toward Friday afternoon. Further cargoes, including those with tricky discharge options, saw rates climb to WS300 for Libya and Ceyhan loaders. This brought more cargoes to the table, though off fairly forward dates, which gave earlier-positioned owners cause for thought as they were reluctant to push too hard and miss their dates. This came as something of a surprise given the buoyant States market, but owners’ fears were realised as activity dried to a drip toward the back end of the week. The inevitable followed, with an older ship taking WS290 once more, and as we approach the bank holiday weekend the going remains flat at best.

US Gulf/Latin America

The States VLCC market saw limited activity over the course of the week, with subdued enquiry and little visible fixing. Freight followed a softer trend early on, influenced by Brazil fixtures, before stabilising as the week progressed. The lack of meaningful activity left the market without clear direction, and a fresh USG test will be needed to properly assess current levels heading into next week.

North Sea

Some over-enthusiasm for Aframaxes earlier in the week failed to materialise, giving owners some initial excitement that quickly faded. Surface trading was minimal, with some units clipped away quietly but at no increment. We see little change in the near term.

Crude Tanker Spot Rates (WS)

Clean Products

East

A few East LR1 stems put into the market gave everyone something to talk about this week; however, once covered, the AG reverted and the situation remains very much one of treading water. The SoH remains effectively closed, and the only stems seen have been WCI or Duqm loading. Unless there is a significant political change, this situation looks set to drag on.

Continued flow of cargoes ex WC India has seen the MR market tighten this week, with rates edging up into the WS380-400 range for EAFR. Sentiment for these runs and for Fujairah, Sohar and Duqm loadings is firing in owners’ favour off the back of a tighter list. EAFR-opening tonnage continues to see a split between those ballasting West and those chancing a ballast North. The cautious tone persists, however, with the SoH remaining untransitable and any return to relative normality still appearing some way off.

East runs firmed in line with EAFR as sentiment and sustained enquiry pushed levels beyond WS320. Westbound cargoes have been few and far between, though with LRs in the AG quieter than in recent weeks there have been one or two questions. Red Sea activity continues to operate largely off-market, with owners resident in the region clipping away localised voyages, and just one MR fixing West at $2.85m for USAC.

UK Continent

The gravitational effect of slower cargo flow and wider softer sentiment has seen TA rates fall from 37 × WS260 to WS230. WAF, Brazil and cross-UKC differentials are also likely to come under pressure and may see more dramatic corrections as they begin to narrow more aggressively than the base rate. Questions abound as to what kind of driving season we are likely to see from the States this year, with $4.50/gallon gasoline likely to create some demand destruction. We have seen a persistent flow of vessels choosing to ballast away from the UKC as the weather and Atlantic coast ULSD export barrels continue to attract. This market still bears little resemblance to a normal one as the global arb market continues to try to find its feet. One thing is clear, however: North West Europe is holding onto more oil than in previous weeks as the crisis looks set to entrench and continue.

A week which has offered very few fixing opportunities for Handy owners in the North, as supply has simply outweighed demand throughout. MRs have also suffered from inactivity, which is doing little to help sentiment, with some even opting to ballast to the USG/USAC in search of higher returns. TC23 closes the week at 30 × WS460, though with bank holidays in Europe today and the UK off on Monday, the feeling is that these last done levels are there to be tested once cargo enquiry surfaces. The ball is firmly in charterers’ court, with further correction expected.

Med

A slow week for MRs in the Med, with little activity bubbling to the surface. Rates have seen a small downward correction despite grade and load port sensitivity coming into play. WS270 is on subs ex Sines-TA and WS280 for a naphtha stem loading out of the Spanish Med. As previously noted, TA is not indicative of the wider market at the moment, as most enquiry requires options and owners are calculating their economics on a round-trip basis across cross-Med, UKC, WAF, SAM and Far East. As a result, MRs have been competitive on 30kt clips throughout the week. A prolonged weekend due to multiple regional holidays should leave a healthy list come next week, so eyes will be on how a softening TC14 and TC6 market might affect rates going forward.

We opened the week in standoffish territory, with rates sitting around WS565 cross-Med and the market enquiry-dependent. Staggered enquiry meant charterers had options and owners were under pressure to be competitive. Additional pressure from larger-cubic MR units proved enough to shift sentiment to a more bearish outlook, hence the collapse in rates. We sit at WS450 now, and the weekend has come at a good time for charterers. With multiple holidays in the region making both this week and next shorter, and a prolonged restock period this weekend, they will be hoping that little momentum is built off the now tight list going forward.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

An overall quiet week for Handies in the North, despite an active start to proceedings with a couple of cargoes covered on Monday at WS435, marking a five-point rise in levels. For a while it felt like there could be more to follow, but enquiry ground to a halt, leaving ships to creep up the list with a couple of naturally placed vessels now prompt and free of cargo. With much of Europe off on Friday and a bank holiday in the UK on Monday, a handful of vessels could be ready to work at the start of next week. We think levels could still hold at last done for now, but activity will need to get off to a fast start.

The Med saw a lightning start to the week, with multiple vessels clipped away on subs on Monday, and by Tuesday the list looked rather bare with most modern and better-approved vessels occupied. Most deals were concluded at WS420, with WS427.5 covered by mid-week and WS440 covered out of the Black Sea, equating to around WS430 XMed. As quickly as the activity began, however, it soon went quiet with few ships left to employ. When normal trading resumes next week, we expect owners to be looking for WS430 with a view to pushing further should enquiry get off to a quick start.

MR

North MRs saw another quiet week with little to report, mainly due to a lack of tonnage. Rates still require a fresh test, and we think next done levels lie between WS325-330. We do not expect much reprieve next week either. The Med has been more active in terms of full-stem availability, with WS340 covered this week, though most deals have been concluded under the radar. Looking ahead, owners are expected to push toward the WS350 mark should enquiry get off to a quick start.

Panamax

Enquiries have emerged in the market for the first time in a little while this week, though unfortunately not of the firm kind, with vessels failing subjects and returning open. There is a clear shift in market dynamics at present. Aframax rates are holding around WS175 for UKC-TA runs and WS180 for Med-TA voyages, which in theory should enhance the competitiveness of Panamax tonnage. However, with TD21 earnings still robust, owners are able to generate stronger returns by opting to ballast to the USG rather than fixing locally, tightening available Panamax supply in the region and restoring a degree of leverage to owners, supporting rate expectations around WS200 for 55kt cargoes. That said, TD21 has seen some softening this week, with rates edging down toward the WS600 mark as Aframaxes have been the preferred vessel of choice for charterers, leaving some Panamax options off early dates for the first time in a while.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeApr 30thApr 23rdLast Month*FFA Q1
TD3C VLCC AG-China WS-51408459362402
TD3C VLCC AG-China TCE $/day-62,000427,250489,250370,000411,500
TD20 Suezmax WAF-UKC WS6212206355223
TD20 Suezmax WAF-UKC TCE $/day50098,00097,500211,00095,000
TD25 Aframax USG-UKC WS80434354720397
TD25 Aframax USG-UKC TCE $/day27,000127,500100,500238,000105,750
TC1 LR2 AG-Japan WS-4553557458 
TC1 LR2 AG-Japan TCE $/day-3,250159,000162,250126,250
TC18 MR USG-Brazil WS21516494544437
TC18 MR USG-Brazil TCE $/day2,00071,25069,25077,50052,500
TC5 LR1 AG-Japan WS-41616657474466
TC5 LR1 AG-Japan TCE $/day-11,500128,750140,25093,00088,500
TC7 MR Singapore-EC Aus WS-13374386319282
TC7 MR Singapore-EC Aus TCE $/day-3,25044,50047,75034,50028,750

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

Bunker Prices ($/tonne)

wk on wk changeApr 30thApr 23rdLast Month*
Rotterdam VLSFO  +112796684672
Fujairah VLSFO  +131883752857
Singapore VLSFO  +87800713830
Rotterdam LSMGO  +11713431,2261,277

Print the report