Table of Contents
Russian Effect
Monumental shifts in global tanker flows that followed the Russian invasion of Ukraine led to structural increases in crude and product tanker tonne miles back in 2022 and 2023, significantly impacting tanker rates and earnings. Whilst these changes in flows were essentially a one-off event, it appears that Russian trade can still impact the mainstream tanker market now, even if the vast majority of its flows have shifted into a grey fleet.
Russian crude and clean product exports have witnessed a sizable dip in recent months. Crude shipments from Russia’s Western ports peaked in March and have since then gradually declined by 0.6 mbd, reaching a yearly low in August. A similar decline was observed in exports of clean petroleum products, which fell by 0.55 mbd between January and August. Whilst voluntary production cuts and Ukrainian drone attacks on Russian energy infrastructure have played a certain role behind lower shipments, flows have also been influenced by seasonal factors. Peak internal demand during summer months meant higher refining runs, with rising volumes of crude and products retained domestically.
As Russian exports are predominantly long haul nowadays, the negative impact on tanker tonne miles has also been outsized. In addition, we have also seen the temporary seasonal opening of crude tanker transits from Murmansk into China via the Northern Sea Route. In August, shipments via this route averaged circa 125 kbd and are on track to reach a similar level in September. Whilst these volumes are fairly modest, they still have a disproportionately high impact on tanker tonne miles due to considerably shorter distances travelled compared to Suez Canal routing. Faced with reduced demand from Russia, it is perhaps not surprising that some mainstream players who have been able to engage in Russian trade under price cap conditions were forced to seek trading opportunities elsewhere, increasing tonnage availability in the mainstream, non-sanctioned market.
In the short term, trade dynamics are likely to change once again. With a number of Russian refineries going through autumn maintenance, crude exports are expected to rebound. Tanker transits through the Northern Sea route also typically conclude in October. Seaborne clean exports could also rise following the end of refinery maintenance, as demand seasonally declines during winter months. At the same time, we are also likely to see rising Turkish straits delays heading into Q4, which will impact tankers trading both Urals and CPC barrels, whilst any ice class conditions in the Baltic this coming winter will only further tighten tonnage availability.
In the longer term, the future of Russian trade is more uncertain. Declining production at maturing fields could see some downward pressure on crude exports, whilst rising domestic demand will eat into clean product tanker exports, unless additional downstream and upstream investments are made, but this could be challenging considering western sanctions.
Russian Seaborne Crude and Clean Product Exports in the West (kbd)
Crude Oil
East
VLCC rates took a pounding this week as rates plummeted daily despite a busy week of enquiry. Charterers took full advantage of the weaker sentiment caused by market orders at the beginning of the week accumulating a high number of offers which inevitably led to a downturn. There could be more challenges for Owners next week as China enjoys the golden week celebrations which could limit enquiry. However, a recovery could be around the corner if Middle Eastern refineries head into maintenance soon, which will help stimulate the market. In the meantime, we are calling AG/China in the region of WS52 and 280 AG/USG fetches WS33 via C/C.
The AG list isn’t overly well-stocked for Suezmaxes but the steady flow of firm positions opening up has been enough to keep a lid on this market. TD23 we assess at 140 x WS55 via C/C, though there hasn’t been much enquiry for Owners to consider but the demand for cleaning up is keeping this market steady. For East runs, the market has just about continued to tick over around last done levels around 130 x WS105.
Despite a dull week on the surface, a few Aframaxes have been cleared from the front of the AG list. However, there is little optimism amongst Owners with Charterers now looking around 80 x WS135-140 for AG/East. Some hope was seen in the Indo region, where a spike in inquiry saw a mini rebound in rates. Overall, the outlook is steady in the East.
West Africa
A very quiet start to the week here for VLCCs as Charterers concentrated on other areas which put rates under pressure and Owners fears were proven correct as we saw levels drop below last done after some activity towards the end of the week. However, it’s not all doom and gloom as with many Owners preferring to stay in the West for the winter market it could limit availability for eastbound runs. Another factor is some eastern ballasters are passing the area altogether and heading on spec towards the greater riches on offer from the USG. Overall the market here remains balanced and rates are likely to be affected by what happens in adjacent zones which are showing a larger amount of volatility. Today we expect WAF/China to fix in the region of 260 x WS58 level.
Suezmax markets in West Africa started the week relatively quiet on face value, with a drop in levels down to WS72.5 for a TD20-type run. However, as this week closes out options cargoes have managed to gain back a few points, but the market needs these heightened activity levels to continue for Owners to continue to gain traction in early trading next week.
Mediterranean
TD6 has seen negative correction this week, where tonnage has continued to build in and around the region. Rates are now trading around the 135 x WS82.5 mark. Though, with talk of Libya production coming back online, we need to be mindful that sentiment may shift fairly quickly here. Rates for East runs from Libya today are relatively stable at around $4.4M.
It has been a rather lacklustre week for Med Aframaxes with values trading softer come the end of the week than where they started. Perhaps the more telling impression of current market behaviour isn’t simply down to rates though, rather the sentiment we endure. Confidence is lacking! As with Libya remaining down, CPC already fixed out toward end of second decade October and surrounding markets in the doldrums, any immediate reprieve looks rather like that carrot on a stick.
US Gulf/Latin America
VLCC rates remained static here for most of the week from USG, as market was affected by the current Hurricane season which led to closure of some offshore installations. There was also an ongoing standoff between Owners and Charterers, which kept rates in the mid 7’s for eastbound runs, but we finally saw some upward momentum towards the end of the week as rates strengthened on some earlier positions where tonnage availability has tightened. Brazil export rates weakened in the first half of the week, following a similar trajectory to events in adjacent regions, but Owners will attempt to push them upwards if WAF and USG enquiry picks up the pace. Today we expect a USG/China cargo to pay in the region of $8m and a Brazil/China run is around WS57 level.
Aframaxes have traded softly this week, hovering at the WS100 for USG/TA while local business has been going for WS85-90 levels.
North Sea
The North Sea Afra market has felt rather repetitive of late, as since levels settled at WS115, the market has only shown slight variances, with these situations proving to be outlier deals once rationale is duly considered. Furthermore, little stimulus to change the status quo is playing a determining factor despite the lists being shortened somewhat, with units exiting the region. Still, with winter just around the corner, perhaps we are just a few weeks away from a potential shift.
Crude Tanker Spot Rates (WS)
Clean Products
East
Slightly less activity seen on the LR2s this week, as a result the push that Owners were hoping to see achieved has not been realised. TC1 flat at the 75 x WS150 levels and UKC for 90kt Jet sitting at $4.65m-4.7m. LR1s have seen a fair amount of chopping and changing over the week and with a few short haul stems and one TC5 to cover the momentum has similarly eased off towards the end of the week. TC5 at 55 x WS170 levels and UKC at $3.9-4.0m, but to note, this route remains unpopular with Owners. More stems are needed early next week, or Charterers will be able to apply pressure and curb Owners’ enthusiasm.
Another week on the MRs East of Suez that has failed to deliver the turnaround the market has been looking for. Rates have once again been eroded off the back of inactivity and an ever increasing number of prompt units. Despite some signs of improvement on the LRs and two cargoes downsizing for East, EAFR is now at WS185 and West is due a test downwards and the feeling is once again that we are not quite at the bottom yet.
Mediterranean
A week to forget for the Handies here in the Mediterranean as rates took another tumble. 30 x WS125 was the call for xMed when we came into the office on Monday but with fresh lists swamped with tonnage the pressure continued from the off. We now find ourselves at a new low of 30 x WS102.5, with Black Sea corrected down to 30 x WS120. Heading into the weekend little remains left to cover and with an armada of ships still to clear out, expect the negativity to continue Monday.
Finally, to the Med MRs, where like all surrounding markets it’s been a poor week. We began the week with Med/TA trading at the 37 x WS115 mark, but sluggish enquiry levels allowed tonnage to continue building and as a result rates have softened once again. 37 x WS85 is now on subs Med/TA for an ex DD ship, with WAF expected to continue tracking TA at a 20-point premium. Market weak into the weekend.
UK Continent
With minimal activity and excess tonnage, MR Owners the North Sea were always going to have a battle on their hands to keep rates flat and unfortunately for them as the week progressed, Charterers hold on the market strengthened. We now break into double digits with 37 x WS95 the call for TC2 and hope for the Owners’ sakes that this is the floor now. WAF has been very limited and in need of a fresh test, but the short xUKC remained a popular run, with many 30kt stems being evolved to this sector with the usual 10-point premium. We await to see how and where this market can pick itself up off the floor, but Owners may need to get comfy as it could take a while.
Really not much to write in this dull sector as the combination of limited cargo enquiry and an oversupply of tonnage keeps Charterers in the driving seat. MRs have also fixed/competed on natural 30kt clips which has only added further pressure to Handy Owners’ shoulders as levels close the week at 30 x WS125 for xUKC. More of the same is expected here in the short term.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
A somewhat stuttering week in the North for Handy Owners. Opportunity lacked overall and in turn, any chance of Owners building momentum were quickly diminished. Charterers managed to push rates down as the lack of activity persisted past the midweek stage. Position wise, it is worth noting that there are not many well-approved younger ships. A two-tier market against the more mature units could well be seen early next week.
In the Mediterranean, Owners face an uphill battle and fresh enquiry proved hard to come by. As the week progressed, vessels crept further up the position list with several prompt units available for Charterers’ selection. Pressure on rates is expected to continue, with the added pressure of CPP units now considering DPP cargoes in the Med.
MR
Full sized enquiry lacked for MRs for the duration of this week in the North leaving the few natural units in the region with little to play for. We await a fresh test with Charterers continuing to monitor surrounding regions for potential coverage.
Mainly, part sized stems to compete for Owners in the Mediterranean as tonnage continues to build. Majority of the positions are in the West Med and will likely throw their hat in the mix for WAF and North business, where most of the full-size enquiry has been coming from.
Panamax
Levels for Panamaxes continue to find their pricing point through the performance of the surrounding Aframaxes rather than the merit of any actual testing. Absent of enquiry, the sector continues to suffer from liquidity issues here in Europe where at the moment the US also fails to offer much glimpse of escape from slow sentiment with levels gradually eroding as the week progressed.
Dirty Product Tanker Spot Rates (WS)
Rates & Bunkers
Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)
wk on wk change | Sep 26th | Sep 19th | Last Month* | FFA Q3 | |
TD3C VLCC AG-China WS | -6 | 54 | 60 | 45 | 51 |
TD3C VLCC AG-China TCE $/day | -6,750 | 33,500 | 40,250 | 19,250 | 24,250 |
TD20 Suezmax WAF-UKC WS | -7 | 73 | 80 | 82 | 84 |
TD20 Suezmax WAF-UKC TCE $/day | -4,250 | 23,000 | 27,250 | 27,750 | 25,500 |
TD25 Aframax USG-UKC WS | 0 | 101 | 102 | 132 | 137 |
TD25 Aframax USG-UKC TCE $/day | -250 | 17,000 | 17,250 | 27,500 | 26,500 |
TC1 LR2 AG-Japan WS | 8 | 148 | 140 | 116 | |
TC1 LR2 AG-Japan TCE $/day | 2,750 | 33,750 | 31,000 | 20,750 | |
TC18 MR USG-Brazil WS | -19 | 171 | 190 | 204 | 220 |
TC18 MR USG-Brazil TCE $/day | -3,500 | 20,500 | 24,000 | 25,750 | 27,250 |
TC5 LR1 AG-Japan WS | 8 | 170 | 163 | 139 | 162 |
TC5 LR1 AG-Japan TCE $/day | 2,250 | 28,000 | 25,750 | 18,250 | 23,500 |
TC7 MR Singapore-EC Aus WS | 5 | 179 | 174 | 188 | 204 |
TC7 MR Singapore-EC Aus TCE $/day | 1,000 | 17,500 | 16,500 | 18,250 | 19,000 |
(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis
Bunker Prices ($/tonne)
wk on wk change | Sep 26th | Sep 19th | Last Month* | |
Rotterdam VLSFO | +12 | 526 | 514 | 554 |
Fujairah VLSFO | -11 | 556 | 567 | 614 |
Singapore VLSFO | -8 | 573 | 581 | 623 |
Rotterdam LSMGO | -6 | 610 | 616 | 660 |