Chinese Stimulus

Chinese oil demand has been underwhelming this year. The IEA had to revise their full year forecast downwards, largely based on lacklustre figures coming out of the country. It now sees Chinese oil demand growth at 180 kbd this year, and an additional 260 kbd in 2025 will bring the total to 17 mbd. The reasons cited were primarily the weak consumer spending on the back of an ongoing housing crisis and low industrial activity, whilst the growing share of EVs in the Chinese car fleet and higher uptake of LNG trucks also played an important role. Recently crude imports into China rebounded, though according to Reuters 1.85 mbd went into stockpiles in August, indicating domestic demand and refinery throughput remained low.

Last week the Chinese government responded with fiscal measures to stimulate the economy, address concerns about deflationary pressure, and bolster the real estate market. The People’s Bank of China (PBOC) cut the reserve requirement ratio by 0.5%, allowing banks to lend more and buy more government bonds. Benchmark seven-day interest rates were cut by 0.2%, mortgage rates were cut by 0.5%, and the downpayment required for a second home was reduced by 10%. Lastly, the PBOC offered liquidity support for the stock market.

Whilst these measures initially led to an increase in oil prices signalling the expectation of improved demand, the bounce faded quickly as rumours of OPEC+ going ahead with their planned output hike in December circulated. The stimulus packages put more money into the pockets of Chinese consumers, which in theory should lead to an increase in consumption and industrial output, both key drivers of domestic fuel consumption. This in turn, could drive higher oil imports, providing support for the crude tanker market. However, the longer-term impact is uncertain. Two key trends behind slowing oil demand growth have been greater uptake of EVs and LNG trucks, and it is doubtful whether these trends will be affected by the stimulus measures.

Overall, the stimulus measures are unlikely to bring the Chinese economy back on to its previous growth path, and additional financial measures to boost the Chinese consumer are required as structural issues remain unaddressed, according to analysts. China’s property market has struggled for several years, and consumer confidence and spending remain low. Weak domestic demand as well as global trade barriers have weighed on industrial activity, which recently contracted for its fifth month in a row. All of this provides headwinds to oil markets. However, whilst demand growth is not forecast to be as high as in recent years, it continues to grow, and these new measures could provide an element of support in the short term, benefitting crude tanker markets. However, in the longer term we may have to look elsewhere for growth.

Chinese Crude Imports

Crude Oil

East

To borrow an old football saying: It was a week of two halves for VLCCs in the AG. The first half was negatively affected by the holidays in the Far East and rates began to slide due to a dearth of enquiry. Any quoted cargoes were inundated with offers which resulted in some fixtures being concluded at below WS50 level. However, there was a noticeable change mid-week as many Owners began to hold back from working AG cargoes after the geopolitical events in the Middle East created some uncertainty. Charterers who had stems to cover found it difficult as Owners put their rates up, with the result being we finish the week approaching the WS60 mark for eastern runs. Today we are calling AG/China in the region of WS59 and 280 AG to USG fetches WS37 via C/C.

The list of Suezmaxes in the AG remains tight and for those with more niche requirements, this is a really tricky market to fix, and one could easily be caught out. Owners will push for over 140 x WS70 via C/C next week. Rates to head East remain untested since the market has pushed up further and we estimate rates to be around 130 x WS120.

Aframax rates in the AG started the week on the back foot with rates lurking around 80 x WS140-142.5 level. However, the combination of regional unrest and USG and Med markets warming has seen sentiment rise across the board. TD8 closes the week at 80 x WS145.

West Africa

Freight rates in the WAF VLCC market have recovered after a recent slump as eastern Charterers returned with a plethora of cargoes for end October/early November and this has helped clear out the earlier ships resulting in a stronger sentiment especially with the buoyant USG sector. We are also seeing healthy levels of enquiry again to UKC which is proving a popular run for those Owners who prefer to stay in the West for the winter season. We expect this more positive outlook to continue into next week and today we see 260 WAF/China fixing in the region of WS62.5 level.

Suezmax markets in West Africa are firm, we haven’t seen a great deal concluded at the higher levels just yet. Though with the Americas as busy as they are and pushing on even further, Owners will be looking for similar returns here. For rates, we estimate WS107.5 for a TD20-type run but this market really needs a fresh test.

Mediterranean

TD6 has yet to be tested since Suezmax markets have pushed up worldwide, based on earnings, rates should be around the 135 x WS110 mark. Libya/East could also use a fresh test, but with winter looking like it is kicking off early in the Atlantic convincing an Owner to head East and miss out seems like it will cost you towards $5M.

The week began as the last ended for Aframaxes in the Med with tonnage balanced against supply. Ceyhan voyages were concluded at WS110 for Med discharge and CPC runs at around WS125 for the same. However, the tinderbox was lit when news emerged of a big jump in Aframax rates over the Atlantic. Owners in the Med were not shy in latching onto this firmer sentiment and the numbers do not lie. A ballast across was a real alternative to fixing last done levels. As such XMed rates moved rapidly into the 120s, 140s and then rumoured 160s, with CPC reaching WS150 and surely higher to come with TD25 now reaching 70 x WS225.

US Gulf/Latin America

VLCC rates from USG have strengthened off the back of a huge jump in Afra rates for TA runs and strong levels of enquiry for East destinations. Tonnage is now tight for earlier dates and even Charterers who are looking to cover dates well into November are having to dig deeper into their pockets. The Brazil export market is also firming especially towards the end of the week partially due to the upturn in adjacent markets. Today we expect a USG/China cargo to pay in the region of $8.4m and a Brazil/China run is around WS60.5 level.

The Aframax market in the USG has lifted the tide, and all its surrounding markets are following suit. Freights more than doubled this week as what appeared to be a flush list full of prompt ships was quickly cleared out without the flurry of incoming ballasters to keep things stabilized. Early tonnage is gone and most of it went on long haul business and will need ballasters to replenish. Last done for 70kt USG/UKC was WS225 and Caribbean on Panamaxes was WS230, as Owners now prefer long haul. We expect the market to continue to inch up if activity permits.

North Sea

The North has benefitted from the uptick in surrounding areas however in its typical fashion this has been limited. Owners who don’t trade the North Sea as their bread and butter have been attracted elsewhere whilst locals enjoy a slightly better return than has been the status quo of late. Now that winter is coming, we can expect further gains but as always progress will be slow.

Crude Tanker Spot Rates (WS)

Clean Products

East

Busy week off market for the LR2s in the East and with an end of week flurry on the cargoes it looks like the list may slowly but surely start to thin out. This has, however, come at a cost as TC1 has consistently dropped on each fixture as Charterers have played their hand very well. 75 x WS115 on subs and UKC at $4.2m. LR1s this week have been extremely quiet; a lack of cargoes has put the cat amongst the pigeons. TC5 needs a fresh test but given the lack of stems and that West remains unpopular, we assess TC5 at 55 x WS145 levels. West is also in need of a test but given the lack of enthusiasm for this voyage expect it to hold on a little bit longer. $3.6m for now.

The MRs in the AG finally came to life and put the lull of a summer market behind us this week with marketed fixtures hitting double fixtures by mid-week. That said, the list Monday was well stocked enough to see rates trade largely sideways, with TC17 the main driver of activity trading in a 15-point window with WS190 the top for a Sikka load. TC12 off the early dates has been tough to cover with cargo history and a lack appetite for East pulling positions out of the running, while a westbound replacement saw a bounce back to $2.25m. We close the week with LR2’s busy, MRs tight off the front end and all eyes on the developing unrest in the region.

Mediterranean

With hardly any cargoes quoted in the MR sector it’s no surprise to see any open tonnage setting sail to the Continent or as we’ve also seen to the USG now in hope for improved fixing opportunities. Rates sit around the 37 x WS85 mark for TA, but with little quoted it’s a bit of a stab in the dark now. Fairly miserable.

And just to top it all off, unsurprisingly this Handy sector is also pretty terrible with rates sitting on the floor at 30 x WS95 for the majority of the week. Excess tonnage, not enough cargoes, it doesn’t seem like things are going to be moving quickly in the week ahead.

UK Continent 

A rather dreadful week ends here in the UKC for the MRs with rates well and truly stuck in the doldrums of 37 x WS90 for TC2 with limited fixing opportunities and a healthy tonnage list. Charterers comfortably cover any cargoes quoted, with a number also being taken out behind closed doors and for the foreseeable future we expect similar numbers ahead. The only shining light we do have is an improved USG sector which has started to see WAF ballasters as well as a few Med boats head that direction. Monday will give a cleared view as to who has decided to chase the market, but for now anyway this market remains on the floor. 

Handies similarly have had a rather woeful week with the larger MRs still enjoying a short haul run in hope of improvement around the corner, therefore keeping the natural sized vessels under pressure. Rates settle around the 30 x WS110 mark and expect this to remain around so until they can shake off the weight of excess MRs. 

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Activity was drip fed this week for Handies in the North. Numbers continued to trade in the low 200’s for local voyages for the duration. Prompt tonnage began to build as we hit the mid-week point and a negative correction started to loom. Sub WS200 levels now appear on the cards heading into next week. Owners will be monitoring larger sized markets as Suezmaxes and Aframaxes continue to firm, in hope some of this activity could trickle down and eventually have an effect.

After a steady start in the Mediterranean this week with WS160 repeated XMed, the second half of the week proved to be a different story with the recent news and disruption. Further cargoes entered the market and Owners managed to gain ground with ships disappearing at a speedy rate. Rates wise WS167.5 is the latest witnessed but Owners will be confident of achieving higher rates early next week.

MR

Mirroring recent weeks natural units located in the region proved scarce. Nevertheless, the few vessels up there did manage to find employment. Charterers will continue to monitor surrounding regions as rates continue to trade on a case-by-case basis.

After a sluggish start in the Mediterranean, we saw WS115 repeated XMed. Full sized enquiry eventually began to enter the market albeit mainly from East Med. We close the week with Owners likely to achieve rates past the WS120 mark from early next week.

Panamax

Spurred on from sentiment in the surrounding Aframax markets, levels will likely be elevated upon next done. However, absent of any tests, for now we are left theorising where levels should sit. Ideally Owners don’t want to ballast back, so perhaps there is some leverage for Charterers to keep a lid on ambition. That said, with the US being a lot firmer, the significance of idle days will place added importance on a cargo being available close to a vessel’s open dates if units opening here don’t simply set their AIS towards the USG.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeOct 3rdSep 26thLast Month*FFA Q4
TD3C VLCC AG-China WS358544870
TD3C VLCC AG-China TCE $/day5,00038,50033,50022,75048,500
TD20 Suezmax WAF-UKC WS301037379111
TD20 Suezmax WAF-UKC TCE $/day19,00042,00023,00026,50043,000
TD25 Aframax USG-UKC WS119220101128184
TD25 Aframax USG-UKC TCE $/day44,00061,00017,00026,25044,250
TC1 LR2 AG-Japan WS-28120148116 
TC1 LR2 AG-Japan TCE $/day-9,25024,50033,75021,000
TC18 MR USG-Brazil WS65236171199210
TC18 MR USG-Brazil TCE $/day12,25032,75020,50025,25025,000
TC5 LR1 AG-Japan WS-23147170141165
TC5 LR1 AG-Japan TCE $/day-6,00022,00028,00018,75025,000
TC7 MR Singapore-EC Aus WS8187179180212
TC7 MR Singapore-EC Aus TCE $/day1,75019,25017,50016,75021,250

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

Bunker Prices ($/tonne)

wk on wk changeOct 3rdSep 26thLast Month*
Rotterdam VLSFO  -15511526537
Fujairah VLSFO  -10546556611
Singapore VLSFO  -13560573625
Rotterdam LSMGO  +13623610641

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