The 18th Blow

The 18th Blow

While the international community remains fixated on the intensifying conflict between Israel and Iran, the European Union is progressing its 18th package of sanctions on Russia, with the implementation expected to be decided upon next week. Although less immediately dramatic, several of the proposed measures could have significant implications for the tanker market. Chief among them are expanded measures against the shadow fleet, a ban on imports of refined products made from Russian crude, and a proposed reduction in the oil price cap from $60 to $45 per barrel.

Sanctioning the dark fleet appears the most straightforward. Around 12% of the global tanker fleet over 25,000 dwt is already under sanctions, with the Aframax/LR2 size group most affected. In this segment, 24% of the fleet is already under sanctions. Reportedly, up to 77 additional vessels could be targeted in the latest package, although some are likely already sanctioned by other jurisdictions. As the pool of sanctioned vessels grows, there has already been an increase in mainstream tonnage re-engaging in Russian trade, in particular Aframaxes and Suezmaxes. This trend will continue if Western pressure on the dark fleet intensifies.

A more challenging measure is the proposed import ban on products refined from Russian crude. The refining process significantly alters the chemical composition of crude, whilst refineries also often use blending components to optimize the refining process and product quality. There is no established global mechanism to trace or certify the origin of the crude used for refining. Enforcing this ban would require either the establishment of a robust verification system or a broader restriction on refined product imports from key importers of Russian crude.

From a supply perspective, Europe in theory could replace banned volumes with supplies from the US, the Middle East and Asia. India and Turkey, which are significant importers of Russian crude, together exported around 340,000 barrels per day of clean products to EU-27 in 2024, which accounts for just 10% of total regional intake. However, in the current geopolitical climate, with the Middle East already on the edge, this would likely lead to tighter gasoil and jet fuel markets.

Perhaps the most ambitious is a proposal to lower the Russian oil price cap to $45/bbl. The timing of this move is highly problematic, considering escalating hostilities between Israel and Iran, and the upward pressure on oil prices. In the short term, Russian exports could decline as a lower cap could deter mainstream tanker participation in Russian trades, while owners reassess compliance risks. However, much will depend on Russia’s ability to circumvent restrictions and buyers’ willingness to lift cargoes using sanctioned vessels. Another potential consequence is further migration of older mainstream tonnage into the dark fleet; however, this path is much riskier today, considering the increasing EU and the UK appetite to directly sanction vessels.

Recently, EU officials privately acknowledged that the recent spike in prices reduces the pressure to lower price cap level. Furthermore, for the measure to be effective, it needs alignment with other oil price coalition countries; yet the Trump administration appears to oppose any further sanctions on Russia at present. Reportedly, G7 members would prefer to delay the decision.

Only time will show what final measures are agreed upon. Detail here is also key. Still, targeting the dark fleet is likely, which will continue to support higher engagement of mainstream tonnage in Russian trade. The product import ban will be extremely difficult to execute, but not impossible; however, the proposed price cap reduction is perhaps unrealistic at the moment without US support and favourable market conditions.

Clean Product Imports into EU-27 from selected countries (kbd)

Crude Oil

East

VLCC rates in the AG end the week at yearly high levels as owners respond to heightened risk trading in this zone. The week had initially got off to a slow start as Saudi stems were released later than usual but once they were announced it acted as a catalyst and the market seemed to increase with every fixture reported. This should continue into next week, but a lot will depend what happens on the political front. If there is a sign of de-escalation, then rates could start to level out. Today we are calling AG/China WS79 and AG/USG WS46.

Tensions remain high in the East, and we have seen improvement in Suezmax rates throughout the week. With VLCCs continuing to boom and a tight list, expect more of the same next week. Rates for East are hard to call as it is largely untested, although it seems unlikely it will be below 140 x WS55 via C/C. Rates to go East are also difficult to forecast but owners are going to be pushing for in excess of 130MT x WS125. All eyes remain on this region as it is poised for upward movement.

In Asia, sentiment has been driven largely on the back of uncertainty due to tensions in the Middle East, coupled with improved demand for northbound stems amid a tight list for end-month loaders. Indo/up rates saw an increase of WS22 pts at time of writing since the start of the week, with further upside on the back of a replacement job for a short-northbound run. However, the question will be if rates are sustainable for July stems as charterers with requirements are holding off till tonnage replenishes but most would agree that the pace has been set moving forward. Rates ex-Oz have also benefitted by a very attractive LR2 market in which the econs will surely favour the Aframaxes and this will see owners exert upward pressure on rates as well. A bullish week overall in the east and we assess Indo/Oz 80 x WS125.

West Africa

Suezmax rates have stabilised in WAF, even though there is ample tonnage to cover demand the sentiment remains strong and rates are approx. WS90 for a standard TD20 run. In the windows ahead, we still have some ballasters but with a firmer AG market we are likely to see less from the East for ballasting.

There was a very low level of activity in VLCC WAF markets this week which contrasted with the previous week. Despite this, owners are in bullish mode because of improvements in other sectors especially in the AG. The market requires a fresh test, but one thing is certain it will be far more than last done.  We are calling WAF/East in the region of WS72.5 today.

Mediterranean

TD6 is quite flat around WS105, there are a healthy number of ships that charterers are trying to press into doing less but morale is high. Rates for Med/East really need a test, there are still a few keen players looking for this run and we feel it will freight around $4.5m but it could be much firmer after a few selected units are clipped away.

Geopolitical disruption made Aframax owners sit on their hands at the start of the week with no one wanting to jump too soon. Premiums were expected so it took a while for pricing to be made; eventually a lack of cargo convinced offers to be made for the limited cargoes in play and thus rates were confirmed. The rise was not what owners were hoping for but we did see rates climb into the WS140s for XMED stems and WS157.5 for CPC loaders, with replacement activity allowing these rates to be repeated in the main before the close. With the States market also warming we have seen some ships leave Europe and this will aid owners in preventing rates from falling away too quickly in the short term.

US Gulf/Latin America

The VLCC USG export market witnessed a recovery this week as bullish sentiment carried over from other areas and increased activity put a dent in the position list. Most of the activity was eastbound and there is some way to go before we reach the ceiling. Brazil exports had a stable week, but rates began to firm towards the end of the week as owners reacted to improvement sentiment elsewhere. Today we are calling USG/China $8.1m & Brazil/China WS69.

Aframaxes retreated this week after last weeks wWS160 td25 deal failed, settling out around WS140-145 for most deals done during this busy week. Owners seem now to be ready to hold back and start the rally again next week.

North Sea

Groundhog Day in the North Sea where not even political crises were enough to force rates off the bottom. The going rate is this region has been WS120-125 levels for the longest time, and this did not change this week. A slow start allowed rates to ease from 122.5 to 120 which has now been the conference rate for a few fixtures. Given a few ballasters have set off for the States there could be some glimmer of hope for the remaining owners but for now it is only a glimmer due to the lack of consistent fixing.

Crude Tanker Spot Rates (WS)

Clean Products

East

As expected, a very volatile week as the political situation in the Middle East caused nervousness and uncertainty. As we have seen in the past these situations lead to a rise in the freight market and this week has been no exception. Charterers have been keen to try and forward fix where possible, off markets deal ticking over consistently in the background and headline rates seeing big jumps. TC1 at 75 x WS215 and UKC (via Cape) at $5.3m. For the LR1s TC5 at 55 x WS225 and UKC at $4.0m. Everyone wants to see how the situation unfolds over the weekend, but we assess that Monday will again see a very volatile market. 

Incredibly punchy week on the MRs Middle East. Unbalanced supply of tonnage and incredibly bullish sentiment has lifted the roof on freight levels. TC17 tested as high as WS365 and tc12 as high as WS260 equiv. and short haul cross Gulf into the 700k bracket. Punchy earnings will of course attract resupply from southeast Asia into the next window – but fragile geopolitical factors would deter anyone calling this a softening factor as we move into a new week.

UK Continent

A week that showed some potential to be interesting, really fell flat on its face with a slow but steady flow of enquiry facing a well-stocked tonnage list. WAF continues to remain on the quiet side, so the majority of enquiry we have seen has been TA with rates slipping to near year lows of the 37 x WS120 mark. With this though we have seen owners pick off some 30kt stems for short XUKC to kill some time but apart from that, this market has struggled to gain much traction. Expect lists to remain well stocked with a good number of laden vessels heading this way. Some promise as we hear of potential in the USG market as well as the hope of a few more WAF stems appearing with larger tonnage casting an eye to the Eastern markets. 

Unfortunately for the UKC Handy owners this week they have been hampered by the larger MRs throughout and despite a thin tonnage list, charterers have been able to bounce between sizes and cover comfortably. With that we have seen rates shrink under the pressure and come Friday were staring at XUKC around the 30 x WS140-145 region. Until these MRs start to shift, we don’t anticipate rates to improve in the short term.   

Med 

With a lack of naturally opening positions this MR Mediterranean market once again outperformed the UKC sector by around 10 points, but unfortunately for owners we’re seeing year lows for TC2, which in turn is only giving us around 37 x WS135 for TA. A couple of trickier grades saw some slight improvement but still with the Handy market struggling also, it seems hard to see much upside quite yet. 

It was always going to be tough for Handy owners to build much pressure this week, with a tonnage list stacked high of options for charterers, but with that we did see a rather active start to the week clearing out a good chunk. 30 x WS130 has been repeated numerous times, with the occasional 30 x WS135 also scattered in there. We find ourselves coming into Friday with 30 x 135 as the last done, but with limited left out there and a number of these fixed vessels opening up towards end month, we await to see how much momentum owners can carry on into Monday. 

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The North has seen the better of the two regions this week rates-wise, where levels have firmed up despite no marked uptick in activity. The existence of a two-tier market is becoming more evident with slightly older and less approved tonnage coming at a discount whilst modern units command a premium. The week started with 30 x WS255 on subs with an older unit before failing soon after. This set the tone for charterers’ ideas with this level repeating before again, quickly failing. Owners managed to firm up rates with 30 x WS257.5 fixed twice, leaving the list tight overall. We feel WS260 will be the target for owners at the start of next week, but with a softer Med and modern units opening up WMed over the weekend, we could see ballasters come into the fold relieving some tightness. 

In the Med, the week started with levels under pressure with multiple prompt units available to work. The market questioned if we would see WS240 on subs for WMed load but a number of prompt replacements managed to support the market at last done levels of WS250 and equivalent. With early positions clipped from the list, a steady feel came over the region. Unfortunately for owners, this was not to last as enquiry seemingly dried up early doors leaving units to work their way up the list. Negative pressure has returned with rate expectations heading down to around the WS240 mark as we head into next week as we expect to see multiple units prompt and free to work.

MR

A quiet week for enquiry in the North with little action to excite the market. Naturally positioned tonnage is tight with WMed units needing to be called on for end-month stems. Next done ideas are around the 45 x WS180 mark for now.

The Med saw a noteworthy fixture of WS155 a 20-point drop from last done. This is not considered to be market reflective for various reasons however, this coupled with prompt tonnage and more top open over the coming days, has negatively affected next-done ideas with charterers most likely aiming to break 45 x WS170 early next week.

Panamax

TD21 has heated up this past week with the Israel/Iran conflict having an upward impact on rates in the region. This has rubbed off the Panamax sector too as owners look to command higher rates. A mixture of delays, chopping and changing and a tight list has caused levels to firm up to the 50 x WS165 mark by Friday. Owners feel bullish for more heading into next 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 change	Jun 19th	Jun 12th	Last Month*	FFA Q2
TD3C VLCC AG-China WS	32	76	44	61	61
TD3C VLCC AG-China TCE $/day	37,250	59,750	22,500	43,500	36,000
TD20 Suezmax WAF-UKC WS	15	90	75	79	94
TD20 Suezmax WAF-UKC TCE $/day	7,500	31,750	24,250	27,250	31,500
TD25 Aframax USG-UKC WS	5	143	138	125	159
TD25 Aframax USG-UKC TCE $/day	0	31,250	31,250	26,250	32,500
TC1 LR2 AG-Japan WS	98	211	114	154
TC1 LR2 AG-Japan TCE $/day	33,250	56,750	23,500	37,000
TC18 MR USG-Brazil WS	27	190	163	152	164
TC18 MR USG-Brazil TCE $/day	4,250	23,000	18,750	17,250	15,750
TC5 LR1 AG-Japan WS	79	218	139	171	158
TC5 LR1 AG-Japan TCE $/day	19,500	41,000	21,500	29,500	23,000
TC7 MR Singapore-EC Aus WS	21	216	196	203	187
TC7 MR Singapore-EC Aus TCE $/day	3,000	25,000	22,000	23,000	18,500

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

Bunker Prices ($/tonne)

	wk on wk change	Jun 19th	Jun 12th	Last Month*
Rotterdam VLSFO	+48	525	477	470
Fujairah VLSFO	+35	550	515	509
Singapore VLSFO	+36	560	524	528
Rotterdam LSMGO	+93	724	631	620

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