Contents
Table of Contents
The Beginning of the End (Take 3)
Once again, negotiations are ongoing to end the war in Ukraine. Back in August we wrote the second iteration of this report, after President Trump and Putin’s first face to face meeting in the former’s second term. That meeting yielded little progress, however, the most recent push for peace has seemingly taken us closer to an end to the war in Ukraine than at any other point since its outset. Negotiations are ongoing, and the initial 28-point plan proposed by the US was countered by a 19-point plan between the US and Ukraine, which Russia was not a part of. Still, as before, the path to peace remains uncertain and it is unclear to what extent trading relationships can revert to pre-war patterns.
Historical demand impact
Tanker tonne miles (crude/DPP/CPP) grew 5.4% in 2022 following the invasion and by 7.2% in 2023 after the implementation of the European/US embargo on Russian oil and oil price cap framework. Whilst not all this growth was attributable to the war, the majority was, particularly in 2023. Tonne mile growth has since slowed, gaining just 1% in 2024, and contracting 1% for the year to date.
Global Crude, DPP, and CPP Tonne Miles
European position
It remains heavily debated whether trade flows might return to “normal” in the event of a peace deal. The current leaders of the UK, France, and Germany, as well as the Baltic and other EU States might try particularly hard to prevent a swing back to Russian energy trade, especially in the event of a “bad deal” for Ukraine. The recently published 28-point plan sets out to reintegrate Russia into the global economy whilst fully lifting sanctions. However, it was reportedly produced without European input. Further, it is unclear what the 19-point counterproposal contains as well as whether Europe had a hand in writing it, let alone Russia. Thus, it remains unclear what the European towards Russia and its energy exports will be.
If it is assumed that any deal is likely to involve sanctions relief, then some normalization in trade flows is possible. The key, however, would be whether European refiners are allowed to return to Russian crude supplies. If this were to be the case, then over time trade flows might shift to resemble something similar (but not the same) as their pre-war patterns. Next year, European refining throughput will be 500kbd lower than in 2022, as closures in Germany are likely to offer reduced scope for Russian pipeline flows to return to previous levels. Equally, other producers (notably the US) have captured market share in Europe and will need to be displaced. On the CPP side, tanker tonne miles surged as Europe scrambled to replace Russian supplies in 2023 with cargoes from the Middle East, India, and the United States. At the same time, Russian cargoes which typically traded into Europe were pushed to new markets in Latin America, Africa and Asia creating substantial inefficiencies to the benefit of tanker owners and traders. Refining margins in Europe (and worldwide) also benefitted initially and would likely come under pressure if Russian supplies return to Europe, and especially if Ukrainian drone strikes on Russian refineries cease. As a result, we could see lower long-haul imports. The overall impact would be significantly lower tonne miles.
As such, in terms of tonne miles, the reaction of European leaders is of utmost importance. If Europe lifts its current embargo on Russian oil, this will have significant negative implications for tanker demand.
More competition in the crude market for Indian and Chinese refiners?
If sanctions are lifted, discounts for Russian oil will narrow and Indian and Chinese crude buyers will see more competition for Russian cargoes. Recent sanctions have seen these discounts widen, as especially Indian demand for non-Russian cargoes has soared. Depending on willingness from Europe to resume Russian imports, India and China could be incentivized to further increase intake from elsewhere (likely West Africa, the Americas and Middle East) depending on prices and refining margins for specific grades.
Impact on tanker sizes
For crude tankers, Aframaxes, followed by Suezmaxes were initially the greatest beneficiaries of the conflict, whilst VLCCs lost market share. As major VLCC destinations, India and China might have preferred to continue to use larger tankers, but given Russian port restrictions, were required to switch to Aframax and Suezmax tonnage. This dynamic has recently shifted, as tighter sanctions have forced China and especially India to increase crude imports sourced from non-Russian suppliers, benefitting VLCCs. Thus, any further increase in Indian or Chinese buying from outside Russia, may still benefit VLCCs more than other sizes, yet smaller crude carriers are set to lose, with Aframaxes the most vulnerable.
For clean tankers, LR2s and MRs saw the strongest gains in tonne miles as the refined products price cap came into effect. MRs may see less downside from reverting trade flows, given they could be redeployed on Russian exports to Europe, whilst MRs in the US Gulf would also gain back some market share in Latin America. For LR2s it is difficult to find a positive outlook, with LR2s feeling the brunt of any decline in trade from the East to Europe.
Dark Fleet
However, a return to a “new normal” is not entirely negative. Since 2022, the dark/grey/illicit fleet has grown to over 1200 ships, with more than 68% of which are now sanctioned. More than 92% are over 15 years of age and critically, more than 60% are over 20 years old. It’s important to note that many of these are engaged in Iranian or Venezuelan trade (particularly in the VLCC and Suezmax segments), so will not be impacted by a potential lifting of Russian sanctions. Still, this clearly indicates that it will be very difficult for the >20-year-old ships currently solely shipping Russian barrels to resume trading in the mainstream market. The hedge therefore for mainstream shipowners is that whilst they may see tonne mile demand fall, any mainstream player returning to Russian trade is unlikely to use >20-year-old tonnage with a chequered trading history.
In the Handy sector, where the fleet has rapidly aged, any increase in demand for sub-20-year-old ships might prove problematic, given many were sold off to serve trade outside the oil price cap framework. As such MRs may pick up extra demand here.
Dark and Sanctioned Tanker Fleet (no. of vessels)
Asset prices and second-hand market
The sale and purchase market could also be heavily impacted. Asset prices for newbuild and secondhand ships surged following the invasion. At the start of this year, 15-year-old prices for Suezmaxes were up 114% compared to February 2022, whilst Aframaxes gained 94%. This year, secondhand asset prices have declined, except for VLCCs which are flat, yet overall remain elevated.
However, the current gap between prices for 20-year-old tankers of any class and scrap values remains wide, and demolition activity is limited. Notwithstanding the challenges involved in scrapping sanctioned ships, the lifting of sanctions could significantly narrow the gap over time, making large scale scrapping a real possibility. Scrap prices are currently near the lowest since 2020 and could come under further pressure if an increase in scrapping is not met by an increase in demand for scrap steel.
15 Year Old Tanker Prices ($Million)
Conclusion
Once again, we now face an uncertain period where negotiations between the US and Russia, with or without Ukrainian and European involvement, could lay the foundations for an end to hostilities. It is impossible at this stage to determine what the final settlement might look like, and most importantly, what Europe’s policy towards Russia and its energy exports will be. In the meantime, Europe is working on its 20th sanctions package, and whilst Trump seems to want to reintegrate Russia into the global economy, further US sanctions are not off the table either.
East
The AG VLCC market began the week by following last week’s active period, with sentiment and freight levels remaining firm. Activity remained healthy early on, and rates continued to edge upward as charterers quietly worked tonnage to avoid adding heat to the market. As the week progressed, enquiry slowed and the tonnage list opened up for the second decade, giving charterers more flexibility and softening overall momentum. A number of ships were picked off through private deals, but visible enquiry thinned out. By the end of the week, the market felt slightly softer, with owners now looking toward next week for a pickup in activity to rebuild momentum for the second decade.
The Middle East Suezmax market has remained somewhat active this week, but we are starting to see the tonnage list begin to open up a little bit which has taken some of the pressure off. For Basrah/West we haven’t seen a huge deal of enquiry, but we estimate rates today to be around 140 x ws75 via C/C still. The market for AG/East runs is still providing great returns, but we have seen rates slip away a little for to around the 130 x ws160 level.
Aframax activity in Asia slowed from the previous week, with most first-decade requirements quietly covered under the radar. Enquiries picked up toward the end of the week, thinning the tonnage list as several units ballasted toward the AG, attracted by higher earnings despite Indo around $50,000/day. Sentiment remains firm, and some premiums could emerge for outstanding first-decade stems. The LR2 market in Australia should no longer cap Aframax rates, as that segment has now caught up with TD14 earnings. Meanwhile, Vancouver continues to draw tonnage away from Indo and East Coast Australia, providing further support to the market heading into December. Overall, the region is fundamentally sound, and we close the week assessing Indo/Up at 80 x ws180.
West Africa
The WAF VLCC market saw limited enquiry throughout the week, with most activity taking place under the surface. Early in the week, sentiment remained firm in line with the AG, though no meaningful fixtures emerged to confirm levels. As the week progressed, charterers continued to drip-feed cargoes into the market, keeping enquiry slow while freight levels held steady. Owner sentiment remained positive, but without visible fixing, market direction stayed unclear. Toward the end of the week, the softer tone developing in the AG began to filter into WAF, yet a fresh test is still needed to determine where workable levels truly stand. In conclusion, the WAF market ends the week steady but largely untested, with participants looking to next week’s enquiry for clearer benchmarks.
The West African Suezmax market has shifted around this week but despite some more prompt cargoes paying over ws150, we expect to see some pressure for natural dates as more tonnage firms up on itinerary over the weekend. Charterers will be looking to break 130 x ws150 for TD20. Voyages heading East are currently at around a 7.5 point premium over UKCM but this may be tested lower as we see the first signs of this market faltering.
Mediterranean
On Suezmaxes in the Med, TD6 has remained steady and even with some tricky cargoes to cover we have seen well approved ships fixed at 135 x ws185 today. Expect some pressure next week for natural dates and charterers will likely manage to dip just below this level. Libya/Ningbo is starting to look like a more attractive run with owners looking to lock in some great returns. As such we have seen some pressure on these rates and today we expect next done to be around $6.1m.
In the Mediterranean Aframax market owners have had their appetites whetted in the last weeks with healthy enquiry and surrounding markets remaining in rude health. However up to and including hump day there were no fireworks, with enquiry bitty at best and owners having to reassess their ambitions for a revival. The three-tier market continued with Ceyhan cargoes achieving ws187.5, normal Libya runs in the 190s and shorter Libya runs at ws200-205 levels. Black sea loaders were concluded at ws210 levels, but these were also few and far between. However, by the end of the week there was a flurry of activity as charterers looked to take care of some shopping prior to the Xmas week parties. As such, the tonnage list was eventually trimmed on the early side. The outlook now is much more balanced with charterer’s hope of rate erosion likely to be unfulfilled, but some new positions firming over the weekend will likely prevent much of a recovery in the short term
US Gulf/Latin America
The US VLCC market saw very little visible activity this week, with enquiries remaining muted everywhere. Freight levels and sentiment stayed positive because they were supported by tight availability and decent levels in the adjacent regions. As a result, charterers showed limited cargoes, and the Thanksgiving period further dampened momentum. By the end of the week, there was little to report in the market but a couple of cargoes covered ex Brazil, with one notably reported today at ws112.5 for Brazil/WCI on an older lady showing some downwards pressure. Overall the market remained steady yet subdued, with participants now looking to next week for a clearer pickup in enquiry and direction.
North Sea
A bit of an uptick this week for Aframaxes with some growth from progressive fixing early on. Bad weather and ballasters have helped to kept things in check and levels stay firm at ws160. Owners overall have a good footing as we go into Christmas party week with a feel that levels will stay stable with half a sniff of gains. The US is still attracting the standard TD25 players so good unit availability remains balanced. Stable as we go into the weekend.
Crude Tanker Spot Rates (WS)
Clean Products
East
Naphtha been the real driver this week across both the LR1 and LR2s and as the week has progress spot trading has caught up with paper assessments near enough. TC1 at 75 x ws180-185 with TC5 at 55 x ws185-190 levels. As the week draws to a close we have seen a couple of units released, the question is whether owners can hold their nerve going into the next window.
Distillate and in particular East/West movement has been quiet by comparison. LR2’s at $4.4m and LR1s at $3.6m (via Cape). The question is whether we are busy on this run next week, and whether we see a further push rate wise.
The MR market opened the week on a firm footing as a tight early December window and more than eight outstanding stems pushed TC17 and TC12 sharply higher, with TC12 jumping to 35 x ws210 and TC17 repeating at 35 x ws260. However, momentum quickly faded from mid-week onward as enquiry thinned and the tonnage list rebuilt. By Wednesday, TC17 had already eased to ws252.5, signalling the start of a broader correction. With a healthier list and limited fresh enquiry, Thursday confirmed this softer tone. By Friday, rates had corrected across the board with TC12 down to 35 x ws190 and TC17 stabilising around 35 x ws250, leaving the market under pressure heading into the new fixing window.
UK Continent
A fairly forgettable week passes for those MRs plying their trade in the UKC, as the hype of the Thanksgiving rush remained just that and general enquiry levels have been slow across the board. Thankfully for owners though we have been dealt a relatively tight tonnage list on Monday morning and with some delays in Antwerp adding a couple of replacements also. Owners have managed to keep rates relatively buoyant with TC2 sitting around the 37 x ws170 mark now. Other options for employment haven’t been that frequent either with Handies preferred on the XUKC moves, and with WAF we have seen the larger LRs opted for where possible. South American runs have been available but so far charterers have kept a lid on any enthusiasm and picked off the right candidates. Monday morning will be interesting as we kick off London Xmas week and with a lack of TC2 this week, the potential for a spike in enquiry is there. But how many deals will be spoken about over a cold beverage and kept quiet? Only by this time next week will we probably get a clearer idea.
The combination of continued enquiry and a lack of supply available on the front end of the tonnage list enabled Handy owners to push TC23 to 30 x ws230 and also UKC/MED to 30 x ws220 at the start of the week. These rates then solidified for the balance of the week as we saw these numbers repeated. Xmas parties are now on the horizon here in London so expect a few ships to disappear quietly under the radar as charterers look to try and wrestle some momentum back.
Med
Fairly limited tonnage partnered with some trickier cargo grades has kept this Med MR market holding a steady course with rates sitting at the 37 x ws175ish mark. As the week started many owners and charterers alike sat back waiting for a troubled WAF run to cover, and once that was cleared out both parties looked to gain the upper hand. But as Thanksgiving hype fizzled out charterers have wrestled back some control on rates and now they still closely inline with their Northern cousins. Limited outstanding come Friday, and we all wait to see if a rush appears on Monday.
A real mix of successes were seen at the start of the week for both the owners and oharterers as rates fluctuated nearly 50 points. This has led to quite a bit of uncertainty as to where next done was to settle and by midweek owners were starting to believe ws260 should be the call. That belief though has been chiselled away by charterers and we see 30 x ws240 repeated. A fair correction considering the enquiry levels but as always with this market, we await to see what next week has to offer, and how much enquiry is kept quiet.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
The North has seen a steady stream of cargoes clipping away tonnage. The week started with WS235 repeating a couple of times before the list tightened and owners pressed their advantage and firmed up to WS240 xukc runs. TD18 printed upward on Wednesday evening, mainly due to speculation of next done. Looking ahead to next week, we expect to see a handful of vessels ready to work at the top of the list, but we soon expect rates to firm up further.
The Med has seen another busy week as enquiry poured early into an undersupplied list, causing rates to quickly firm up from WS187.5 to WS205 by the close of play. Owners here feel bullish and keen to press on levels further and close the gap between xukc runs. We expect to see a somewhat replenished list come Monday, but if previous weeks are to go, we expect to see these units snapped up quickly, accompanied by firmer levels.
MR
MRs in the North saw a fresh test up to 45 x ws180 as Wmed owners took advantage of the short supply and pushed rates on. Units remain tight and next up, owners feel confident. In the Med, units were clipped away from the off and levels soon began to rise up to ws165 reported and then on further with levels sitting between WS170-175 by the end of the week. Like their Handy cousins, we expect owners here to continue to push on early into next week if given the chance.
Panamax
A steady week for Panamaxes as levels floated around the WS200 mark for most of the week, as pre-Thanksgiving fixing flowed into the market, turning over units. We expect to see a good level of activity as we look to end the first decade December dates next week, which should keep these levels supported.
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 | Nov 27th | Nov 20th | Last Month* | FFA Q4 | |
| TD3C VLCC AG-China WS | 2 | 136 | 134 | 128 | 110 |
| TD3C VLCC AG-China TCE $/day | 4,000 | 140,750 | 136,750 | 129,000 | 104,250 |
| TD20 Suezmax WAF-UKC WS | -6 | 151 | 156 | 145 | 140 |
| TD20 Suezmax WAF-UKC TCE $/day | -2,750 | 75,000 | 77,750 | 70,250 | 65,750 |
| TD25 Aframax USG-UKC WS | 8 | 211 | 203 | 223 | 198 |
| TD25 Aframax USG-UKC TCE $/day | 4,000 | 60,000 | 56,000 | 63,500 | 51,250 |
| TC1 LR2 AG-Japan WS | 33 | 184 | 151 | 141 | |
| TC1 LR2 AG-Japan TCE $/day | 12,750 | 50,750 | 38,000 | 34,500 | |
| TC18 MR USG-Brazil WS | -6 | 222 | 228 | 221 | 230 |
| TC18 MR USG-Brazil TCE $/day | -750 | 31,250 | 32,000 | 30,500 | 30,750 |
| TC5 LR1 AG-Japan WS | 0 | 150 | 150 | 151 | 154 |
| TC5 LR1 AG-Japan TCE $/day | 9,750 | 36,500 | 26,750 | 26,000 | 25,500 |
| TC7 MR Singapore-EC Aus WS | 18 | 219 | 201 | 178 | 192 |
| TC7 MR Singapore-EC Aus TCE $/day | 3,750 | 27,750 | 24,000 | 20,000 | 22,250 |
(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis
Bunker Prices ($/tonne)
| wk on wk change | Nov 27th | Nov 20th | Last Month* | |
| Rotterdam VLSFO | -8 | 407 | 415 | 439 |
| Fujairah VLSFO | -16 | 432 | 448 | 450 |
| Singapore VLSFO | -14 | 437 | 451 | 461 |
| Rotterdam LSMGO | -91 | 647 | 738 | 700 |
