The Tiger Cubs Roar

In the past decade, oil demand has been defined by rapid growth in the Chinese economy, with the country responsible for 60% of global growth. However, with the outlook for Chinese oil demand changing, the structure of global oil trade is also shifting. A combination of factors is contributing to plateauing Chinese demand, but the biggest factor is the significant penetration and widespread adoption of electric vehicles. In addition, there is an increasing uptake of LNG powered and electric trucks.

While China is stagnating and expected to experience a decline in demand in the long run, India has emerged as the world’s biggest driver of oil demand. As a rapidly growing economy, its demand is driven by urbanization, infrastructure development, and industrialization, all of which are heavily reliant on oil. What sets India apart is that its demand is highly concentrated in transport fuels. While the rest of the world is moving toward EVs, India is doubling down on oil-powered vehicles, with the country’s total oil consumption projected to jump by 1 mbd between 2024 and 2030.

Alongside India, a group of Southeast Asian countries, referred to as the Tiger Cubs – Indonesia, the Philippines, Thailand, Malaysia, and Vietnam – is significantly contributing to the eastward pull of oil trade. Indonesia is leading the pack.

All in all, oil demand in other non-OECD Asia (excl. China and India) is forecast to increase by nearly 1.3 mbd by 2030 from 2024 levels. The vast bulk of this growth will come from the Tiger Cubs, driven by diesel-intensive sectors, rapid economic growth and population expansion. Jet fuel/kerosene and gasoil will further catapult the group’s overall fuel consumption, underpinned by an emerging middle class and industrialization. These countries are also emerging as key nearshoring hubs in Asia, as international organisations diversify their manufacturing away from China. The expanding industrial base and rising demand for packaging and construction will also bring several new steam crackers online, supporting demand for naphtha.

As demand continues to grow, further gains in regional refining runs are also anticipated. Most notably, throughput in India could increase by 0.9 mbd by 2030, driven by several greenfield plants coming online. Refining runs in China are also expected to increase, but will see much smaller growth, up by just 250 kbd over the corresponding period, limited by weakening domestic demand for transportation fuels. Throughput in other non-OECD Asia is projected to grow by 0.3 mbd, with two new refineries expected to come online in Indonesia and Thailand but runs in developed Asian economies could see a drop on a similar scale. Overall, regional refining throughput could see a net growth of 1.3 mbd by 2030. Meanwhile, a modest decline in Asia’s production levels is also in the cards, down by circa 400 kbd, mainly driven by easing production in China, Malaysia, and Australia. This growing gap between regional production and rising refining runs suggests incremental gains in long-haul imports from the Atlantic Basin, and medium-haul imports from the Middle East.

While Chinese oil demand is plateauing, trade to Asia is still expected to increase, albeit at a slower pace than previously thought. The rise of India and the Tiger Cub economies is altering the structure of oil trade, with demand becoming more broadly distributed. As such, tanker owners will need to look beyond China, with growth driven by a wider group of countries.

Asia Pacific Oil Demand Outlook, 2024-2030

Crude Oil

East

An uninspiring week in the AG VLCC market. VLCC enquiry has been drip fed into the market not allowing for momentum to build. Looking ahead to next week the hope will be that the pace of enquiry picks up as our attention is solely focused to first decade August stems. Today we are calling AG/China WS53.5 and AG/USG WS32.

The Suezmax markets in the East have firmed slightly this week and the list looks balanced, so we likely see more of the same next week. Rates for Basrah west today are around 140 x WS47.5 via C/C. Rates to head East also remain steady with a firmer feel at around 130 x WS95.

For Aframaxes in Asia, the week ends on a busier note as more ships were clipped away amid charterers working privately. However, activity was not enough to move the needle, and rates were kept in check seeing that the damage was already done last week owing to tepid demand. The region could see a momentary spike in rates because of tightness for late July and if any replacements were to occur, but it appears that we have moved into August fixing where the list opens again. A slight improvement to sentiment for the region to close the week and we assess Indo/Oz 80 x WS112.5.

West Africa

VLCC activity has been ongoing throughout the week, though much of it has taken place under the radar. Enquiry is expected to pick up for the mid-month loading window, where the tonnage list begins to open up, offering charterers greater flexibility. As of today, we are calling WAF/East in the region of WS53.5.

The list for early dates has been tight for Suezmaxes in WAF throughout the week, with some charterers facing some difficult offers. Though with the list due to open over weekend we expect rates to be steady around WS87.5 for a TD20 run. Rates to go East are still at a premium of around 10 points.

Mediterranean

TD6 has pushed up this week due to some replacement activity, though on natural dates we expect rates to remain around the WS95 mark.  Rates for Libya/Ningbo are relatively untested still, but we feel charterers will be looking at around $4.2m.

Aframax owners in the Med market have had a week to enjoy after a few which have been underwhelming. Rates for a vanilla Ceyhan run started the week at WS127.5 levels but as trading days passed, charterers cast an eye at both port delays and a thin list and decided to go out in force. As end month dates for Libya were fixed in advance, owners saw an opportunity to push with rates hitting WS130 and beyond. At the close the list remains very tight with Ceyhan runs reaching WS135 and the going remains firm.

US Gulf/Latin America

In VLCC markets, although export cargo volumes from the Americas have improved, the overall pace remains sluggish. Freight levels have strengthened in line with sentiment and much like in the rest of the Atlantic basin the tonnage list continues to be a key focus. The Brazil export market continues to be active with a decent flow of enquiry across this week, levels unfortunately corrected downwards although with signs of improvement in the US markets hopefully rates steady out next week. Today we estimate USG/China pays $7.55m while Brazil/China is in the region of WS50.5.

Local Aframaxes had minimal activity this week, two of the three reported WS125 for TD25 have details in the market. Owners will try to maintain but I suspect further softening could come next week unless we see a flurry of activity.

North Sea

Cargo enquiry has remained a rarity throughout this week as workable tonnage has simply outweighed demand. Local rates reached the depths of WS115 as the summer feel continues. We did see a couple of units fix for Libya stems, but this caused little impact in changing the soft sentiment in the North. Good amount of relets remain in the region so we should expect much of the same for beginning of next week.

Crude Tanker Spot Rates (WS)

Clean Products

East

As expected, the value was seen on the LR2s this week and have had a big clear out. Rates have pushed upwards, and owners have played a sensible hand with gentle rate rises on last done. TC1 at 75 x WS125 and West seeing a fresh test at $3.7m. The LR1s being active saw the front end of the list tightening right up. TC5 reported to be on subs at 55 x WS147.5 and West at $2.9m. If we see last minute early stems or if replacements are required, then charterers could find themselves in a tight spot. However, as we approach the next fixing window charterers will have a little breathing spaces as more ships come open.

All in all, it’s been a positive week for the MR’s here in the AG with rates picking up after an active second half. An uptick in enquiry midweek has seen the list tighten up on the front-end and with cargoes still to cover off end month window owners will be positive heading into the weekend. We finish the week with TC17 pushing to 35 x WS220-225 levels and TC12 at the 35 x WS160 mark.

UK Continent

With MR tonnage displaced away from the UKC due to the poor earnings over the last few weeks any uptick in cargo flow was bound to have an impact. This was also combined with the USG rates softening which created the perfect ingredients for owners to be reluctant to go TA at last done levels. Rates have consequently pushed up from the lows 37 x WS90 TA to circa 37 x WS120 with a tight list facing any prompt replacements. This rise whilst good for owners only puts rates back marginally above previous yearly lows prior to the lure of the USG rates. Owners feel there is more work to be done so the next few weeks could be quite interesting. 

It has been a positive week for Handy owners in the North as we have seen levels improve by 25 WS points for XUKC. With MRs firming and no longer acting as a cap on 30kt freight and partnered with a tonnage list lacking depth, Handy owners were able to capitalise and push the market. Weekend break comes at a good time which should enable a few itineraries to firm up but for now owners are bullish into the weekend.

Med 

With some more cargo activity and a list that is only populated by discharging vessels a rise in MR rates was on the cards. With tonnage displaced away from the UKC and Med regions and widespread delays in European ports picking a ship that can make the dates for both owners and charterers has become tricky. This has also been exacerbated by a very hot Handy market. Rates have pushed up from WS100 and probably go into the weekend at more around 37 x WS115 TA/UKC. 

With a perfect storm of increased cargo flow, chaos in European ports with widespread delays and some tricky restrictions to cover, Handy Med rates dramatically traded North from WS130 this week. The position list remains tight and the highest achieved has been 30 x WS190 which was lifted yesterday. Owners remain confidently bullish but are also mindful that rates can collapse very quickly in short haul markets so they are trying to book the best runs.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

It’s been a quiet week in the North for Handy owners with just a handful of fixtures to report. The week started with prompt tonnage readily available to work and with idle days beginning to build for some owners. Enquiry surfaced early in the week with three cargoes in the market, perhaps signalling a promising start in terms of activity. Levels softened to WS240, marking a 10-point drop from last done. Some owners chose to look to the Med for better prospects, which trimmed up the list slightly. Unfortunately for owners, enquiry struggled to surface throughout the rest of the week with charterers’ ideas now looking to shoot for sub WS240 on next done.

In the Med on Monday morning, the list looked tight off early positions following an active previous week. Enquiry surfaced quickly and at a consistent and steady pace throughout the week. With some mixed levels seen in the high WS220s, WS230 was soon repeating. As the week progressed, rates moved through the gears and owners began to feel bullish and push on rates, with the week closing out with repetitions of WS240 for vanilla XMED cargos. Looking ahead to next week, we expect to see light replenishment and a tight top of the list.

MR

Enquiry in NWE has struggled to surface over the last week despite tonnage available to work. Naturally placed units are there to work in the fixing window come the start of next week, which should see levels tested down toward the 45 x WS160 mark if enquiry surfaces to take advantage. The Med has seen the best of activity this week, with MRs thin on the ground throughout the week. Rate ideas currently sit at the 45 x WS170 mark with owners feeling confident they can push on further; however, enquiry will need to surface quickly to do so.

Panamax

Another quiet week for Panamaxes this side of the continent as enquiries remain elusive. Next up, tonnage opens in the first decade of August, pushing on the fixing window somewhat. Despite this lack of enquiry, rate ideas stay flat at the 55 x WS110-115 level for now. TD21 saw a downturn in fortunes this week as the pace of activity failed to keep up with replenishment, resulting in a softening of rates. We are yet to see the floor here with WS155 the current benchmark.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeJul 17thJul 10thLast Month*FFA Q3
TD3C VLCC AG-China WS453494455
TD3C VLCC AG-China TCE $/day5,25033,75028,50022,50031,750
TD20 Suezmax WAF-UKC WS989807582
TD20 Suezmax WAF-UKC TCE $/day7,00032,75025,75024,25025,750
TD25 Aframax USG-UKC WS-15125140138135
TD25 Aframax USG-UKC TCE $/day-4,75025,25030,00031,25025,000
TC1 LR2 AG-Japan WS14125111114 
TC1 LR2 AG-Japan TCE $/day5,50027,25021,75023,500
TC18 MR USG-Brazil WS-14162176163172
TC18 MR USG-Brazil TCE $/day-2,75018,50021,25018,75018,250
TC5 LR1 AG-Japan WS-1143144139145
TC5 LR1 AG-Japan TCE $/day25022,50022,25021,50020,750
TC7 MR Singapore-EC Aus WS-5197202196182
TC7 MR Singapore-EC Aus TCE $/day-50022,25022,75022,00018,750

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

Bunker Prices ($/tonne)

wk on wk changeJul 17thJul 10thLast Month*
Rotterdam VLSFO  -15506521525
Fujairah VLSFO  -15506521550
Singapore VLSFO  -12512524560
Rotterdam LSMGO  -4703707724

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