Running Low

Panama Canal auction prices have hit record highs this month, driven by falling Gatun Lake water levels and an intensifying El Niño. Water levels are indeed falling ahead of the dry season and have now slipped below the long-term average for this time of year. The Panama Canal authority (ACP) has already cut Neopanamax draft restrictions twice this year, with further reductions to 48.5ft (14.78m) on 15 August, 48 feet (14.63 metres) on 26 August and 47.5 feet (14.48 meters) on 3 September. Last month the ACP also announced a suspension for daily transit auctions for users of its Panamax locks effective July 25, 2026, and until further notice, which has effectively reduced the Canal’s daily booking capacity from 36 vessels per day to 34 (5.6%).

For now, however, the scale of the decline in Gatun Lake water levels, the reservoir that feeds the canal’s lock system, is a different story to 2023 (the last time when transits were severely disrupted). 2026 started the year well above the historical average, but levels have fallen steadily since April, crossing below the ten-year average around mid-year. What hasn’t changed, however, is the gap to 2023: this year water levels have remained several feet above where the lake stood at the same point in 2023.

Water levels come under the most pressure in El Niño years. All four of the canal’s record lows have coincided with one. This year’s event is being talked about as potentially the strongest on record. NOAA now puts the odds of a ‘very strong’ event by October-December at 81%. Another climate scientist Zeke Hausfather put it even more bluntly, saying the models are ‘forecasting something outside the envelope of anything we have ever observed.’

Even so, history suggests the worst for Panama may not be this year. If we look at every major El Niño on record – 1982-83, 1997-98, 2015-16 and 2023-24, the most damage to canal water levels largely occurred in the year that followed as seasonally water levels bottom out in Q1, ahead of the wet season in Q2. If this event follows the same pattern, early 2027 is the time to watch, not 2026.

The immediate pressure, however, isn’t really about water levels yet, it’s about growing transits and competition for slots. Total transits are up 7.7% year on year, and container ships, which carry booking priority, are taking a growing share. Tanker transits have also increased: the Hormuz closure saw a temporary spike in clean product shipments to Asia, whilst the Jone’s Act waiver is seeing the US West Coast increasingly supplied from the US Gulf. The combination of higher transit volumes and a reduction in capacity inevitably translates in increased congestion and longer waiting days. Waiting days for Southbound transits reached 9.5 days on 13 August to its highest level over the past 30 days; but Northbound transit days have eased to 7.1 from 10.9 days a few days earlier.

The West Coast of the Americas is the most exposed to falling water levels at Gatun Lake and rising congestion, as the region depends on the US Gulf for the bulk of its oil product supply. Alternative supply options are limited right now. The Hormuz closure has cut crude feedstock into Asia, which means fewer product cargoes moving from the Far East to West Coast South America and the US West Coast. Auction prices and waiting days could climb further (unless transit volumes fall) and that will have implications for freight. Still, any future transit restrictions need to be viewed in the context of rising MR tonnage supply, with some vessels repositioning West following the Hormuz closure and rising deliveries.

Panama Canal Total Oceangoing Transits (No)

Crude Oil

East

The AG/Red Sea VLCC market remained relatively quiet on the surface this week, although some activity continued to take place under the radar. Geopolitical tensions and uncertainty surrounding the Strait of Hormuz continued to influence sentiment, while vessels gradually disappeared from the tonnage list. With prompt availability tightening throughout the week, freight remained well supported and started to face some upward pressure. Owners will now be hoping for a stronger flow of enquiry next week to maintain the momentum.

It was very much a case of continuation for the AG Suezmax market. The situation remains volatile without a great deal being moved in and out on Suezmaxes. Most owners are opting to ballast via COGH now instead of gambling that we might see the Straits open.

Asia Aframaxes closed the week on a positive footing, with steady chartering activity for 2H August tightening the tonnage list. TD14 printed just below WS170 on Friday, with further upside possible next week given a handful of outstanding requirements across both short- and long-haul voyages. NWOZ stems should provide additional support, with natural openers scarce and coverage likely to require eastern ballasters from an already constrained regional list. This should keep owners well positioned to test higher levels should fresh demand continue to emerge. We close the week on a firmer note, assessing Indo/Up at 80kt × WS177.5.

West Africa

The WAF VLCC market remained relatively subdued throughout the week, with only limited enquiry and a few fixtures reported. Freight showed some signs of softening following recent activity, although the tightening tonnage list continued to provide underlying support. With limited prompt vessels available, any meaningful pick-up in enquiry may require charterers to attract additional ballasters from the East. Owners will be hoping for more activity next week to give the market clearer direction.

In the WAF Suezmax space, TD20 is now very firm this week off the back of a few fixtures from the Americas that were caught on prompt dates. The list is pretty tight, and with CPC paying phenomenal money, owners are feeling particularly bullish.

Mediterranean

TD6 is hugely volatile still, with WS575 still the reported last done, athough it appears things have cooled off a little from this figure and last done is slightly lower. Expect rates to remain firm with a limited pool of owners still willing to fix the business. It does seem likely that the longer we go without an attack on a non-Russian vessel, more owners will consider it again. In the Med, rates remain firm, largely off the back of firm WAF and CPC markets. There haven’t been huge levels of enquiry from the Med itself, but ships opening up there have both of those options, so are unlikely to give their ship away for less.

The Med Afra market, enjoyed a rather more fortuitous week, also benefitting from US sentiment spilling over; after an initial decline, activity did pick up. The results were quick to show, as Ceyhan bounced back to WS220, with shorter flats hitting WS230 and stems uncovered at time of writing. Furthermore, we even saw a CPC test illustrating the disconnect with local XMed numbers, whilst also showing good value against the Suezmaxes. Drawing a close to the week, this positivity is likely to carry forth initially into next week.

US Gulf/Latin America

The States VLCC market saw mixed sentiment throughout the week. Early fixtures in the USG and softer Brazil levels initially put downward pressure on freight, with some business concluded below previous levels. As the week progressed, however, activity in surrounding regions and a gradually tightening tonnage position helped sentiment recover. Freight appears to be stabilising, although a stronger flow of enquiry will be needed next week to confirm whether the market can build fresh upward momentum.

North Sea

The continent maintained a steady course this week, although not off its own merit. Instead, where activity was lacking, support from the US was enough to keep conditions level as and when stems came to market. For now, this is likely to continue, where the simple threat of higher earnings elsewhere creates an artificial floor.

Crude Tanker Spot Rates (WS)

Clean Products

East

A lot more activity this week for the LRs in the Middle East. The LR2s have very much stolen the limelight, with some sharp rises on last done with each new fixture, with a reported $6.2m on subs for a west stem (outside the AG) and a number of outstanding cargoes as the weekend approaches; owners will most likely be ready to push further come Monday. Although relatively steady with activity, the LR1s haven’t seen the increase in rates yet, with 55 × WS195 for naphtha runs repeated multiple times. That said, the tonnage list has been cleared out of ships, and we expect that the LR1s will really see some momentum here next.

Overall, it’s been a much slower week for the MRs in the WCI/outside SOH region, with fresh enquiry only being drip-fed into the market. An active end to last week kept the list tight on the front end, and as a result rates remained steady for most of this week, with TC17 ex Sikka repeated at 35 × WS290. However, fast forward to Thursday, where we saw TC17 ex Sikka slip by 5 points off the back of an extending fixing window and sluggish enquiry levels. Loads ex Duqm (+10), Sohar and Fujairah (+20) remain at a premium.

Activity inside the SOH has been busy, however, with a handful of ships being taken under the radar, and as a result ideas for X-AG have now increased to around the $1.5m mark. Finally, the Red Sea market remains firm, with the crisis in the region ongoing and owners less willing to engage in anything that involves BEM transit. Heading into next week, only a couple of cargoes remain outstanding, but with the list still slim for the rest of the month and various conflicts in the region ongoing, not too much movement is expected.

UK Continent

When the well stocked tonnage list was pulled on Monday morning, owners could sense they had a battle on their hands to hold onto last done rates as charterers were offered many options for fixing. The only real question we’ve asked this week is just how far the market will slide, and it seems after a few repeats come mid-week, 37 × WS110 is the call for TC2 now. WAF remains quiet, but with the few tests we’ve seen, we anticipate around the 37 × WS160 mark for the right vessel. Owners have continued to pick at XUKC and UKC/MED runs usually seen on the 30kt size, which has kept tonnage moving, but the real peak of interest is the USG market finally finding its feet again back to the WS200 mark. A quiet rest of the day could well see a few vessels set sail for the USG horizon over the weekend.

The handies have been at the mercy of the MRs this week as we have seen the larger units cannibalise both XUKC and UKC/MED stem. MRs have softened to 37 × WS140 for XUKC, which is 30 × WS172.5 equivalent, so it does feel that handy owners will have to once again adjust their fixing ideas down if they want to be able to compete on cargoes moving forward. Oversupply from the larger units remains the biggest thorn in the 30kt clips side here.

Med

With a number of ships being fixed over the past couple of weeks for UKC/Med runs, the results have started to show on our lists, with well stocked shelves being offered to charterers. Activity has been slow, with the majority of stems coming ex Spain and Portugal, but in reality not enough to keep owners’ interest this week. Rates will remain pressured, with the only olive branch being that we anticipate tonnage ballasting up from WAF to take a sharp left turn towards the USG region.

Finally to the Med handies, where, not to break the trend, an equally well stocked tonnage list has been provided, and owners have felt the pressure from charterers throughout, with each fixture. Subsequently, we have seen rates slip to 30 × WS175 now, and with little to suggest much improvement is around the corner, owners will be digging in over the weekend to prevent any further losses.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The UKC handy market began the week with a constrained supply picture, with market focus centred around forward dates and West Med vessels covering requirements. Firm sentiment prevailed, with rate expectations indicated around WS330-335. As the week progressed, vessels were steadily absorbed through a combination of reported and under-the-radar activity, further tightening availability and leaving owners well placed to test higher levels, with reports emerging around WS340. By week’s end, continued activity had further reduced an already scarce tonnage list, leaving charterers with limited workable options. Forward fixing has become an increasingly prominent feature of the market and is expected to continue, with owners seeking improvements on recent fixtures and rate ideas now around WS340-345.

The Med started the week with a number of workable options on the surface. Following several WS360 fixtures reported the previous week, expectations were that owners would look to build on those levels, with sentiment pointing towards WS360-365. As the week progressed, activity was believed to be taking place beneath the radar, with a number of vessels being clipped away, particularly in the East Med. This tightening supply picture, combined with recently reported activity, left owners maintaining bullish ideas, with expectations around WS365-375. Rounding off the week, the continued absorption of tonnage and the presence of several outstanding stems supported a firmer market outlook. With availability tightening, owners are expected to test for higher levels heading into next week, with rate ideas around WS370-375.

MR

The week began with a tight tonnage list, with the majority of workable units opening in the second decade. A well-publicised test was needed to help establish market levels, although sentiment remained firm, with expectations around WS265-270. As the week progressed, enquiry failed to materialise in any meaningful way; however, the list continued to tighten as vessels were clipped away, with some activity suspected to be linked to 30kt stems. As a result, owners maintained firm rate expectations around WS265-270. The week closed much as it began, with the market still awaiting a meaningful test. Despite this, the scarcity of available tonnage is expected to encourage charterers to fix further forward, while owners continue to hold a firm stance, with levels seen around WS265-270.

In the Med, handies had started the week with sentiment supported by the strength of the UKC handy market, despite a lack of meaningful activity, with expectations around WS265-270. As the week progressed, this trend largely continued, with little fresh enquiry surfacing. However, tightening tonnage availability left owners maintaining firm rate ideas whenever called upon, keeping expectations around WS265-270. To round off the week, the MR market remained supported by limited availability and continued strength in the Handy sector, incentivising some units to consider 30kt stems. Should a fresh 45kt cargo materialise, owners are expected to adopt ambitious rate expectations.

Panamax

The week began with a steady flow of Panamax units coming across the Atlantic and opening on varying dates in both the UKC and Med markets, providing charterers with a reasonable selection of options. At the same time, Aframax levels appeared to have found a floor, supporting a steady/soft market tone with expectations around WS180-190. As the week progressed, a number of units were clipped away, while some backhaul opportunities emerged. Nevertheless, owners remained keen to ballast back towards the CBS-USG market, where earnings continued to strengthen, supporting levels around WS185-195. By week’s end, sentiment had firmed further as the Aframax market began to show signs of recovery, providing additional confidence to owners and reinforcing firmer rate expectations heading into the new 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 changeAug 13thAug 06thLast Month*FFA Q3
TD3C VLCC AG-China WS4479476373435
TD3C VLCC AG-China TCE $/day3,500509,250505,750389,500451,000
TD20 Suezmax WAF-UKC WS55227172232230
TD20 Suezmax WAF-UKC TCE $/day33,000110,75077,750115,250104,750
TD25 Aframax USG-UKC WS43349307254318
TD25 Aframax USG-UKC TCE $/day14,25098,50084,25064,25080,250
TC1 LR2 AG-Japan WS-5518523433 
TC1 LR2 AG-Japan TCE $/day-2,000146,750148,750120,500
TC18 MR USG-Brazil WS10235225274260
TC18 MR USG-Brazil TCE $/day1,25024,75023,50032,50026,250
TC5 LR1 AG-Japan WS-8534542444420
TC5 LR1 AG-Japan TCE $/day-2,500108,000110,50088,00077,500
TC7 MR Singapore-EC Aus WS-4256260283246
TC7 MR Singapore-EC Aus TCE $/day-1,00024,00025,00030,25021,250

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

Bunker Prices ($/tonne)

wk on wk changeAug 13thAug 06thLast Month*
Rotterdam VLSFO  +25657632682
Fujairah VLSFO  +35810775780
Singapore VLSFO  +7824817765
Rotterdam LSMGO  +11912381,1191,136

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