First Five Days

Following a very impactful end to the Biden era, the oil and tanker markets expected Trump’s second stint in the White House to start where Biden left off. Yet, for all the jaw dropping executive orders issued on other unrelated topics, the shipping and energy markets so far seem to have missed out on any immediate impact. However, even if the details are lacking, some clues are starting to emerge as to how the new President will tackle a number of key energy related issues.

Out of all the geopolitical events witnessed so far this decade, the war in Ukraine has arguably been the most impactful for the tanker markets. Trump famously said he would end the war “in a day” but for now (and perhaps surprisingly) this does not appear to be a priority. In recent days, however, the President has threatened further sanctions and possible tariffs against Russia if a deal is not found to end the conflict. Whilst that may seem fairly light touch, it does tell us two things; firstly, the sanctions Biden introduced and oil price cap are unlikely to be removed in the short term; and secondly, the process to end the conflict is unlikely to be swift. Buyers of Russian crude, most notably in India, remain none the wiser as to what the future looks like.

Likewise, very little mention has been made concerning policy to Iran. Most participants in the oil markets, including Chinese buyers of Iranian crude, began reacting to increased sanctions threats before Trump’s second term. Yet, aside from Biden’s actions two weeks ago, there has been very little said about how to reign in Iran. The question remains, will tougher sanctions be introduced?

Venezuela has received some airtime from the new President, who stated that the US might not continue to buy Venezuelan oil, whilst further sanctions could be implemented following the outcome of diplomatic meetings. The country exported 235kbd to the US last year, whilst another 125kbd went to Europe and India under license.

The potential for more sanctions on Russia, Iran and Venezuela of course all signal higher oil prices, yet Trump can claim that oil prices fell during his first week in office. However, to keep prices in check under a stricter sanctions regime he may need some help. On Friday, Trump reiterated to OPEC that they need to bring the price of oil down, which of course suggests higher production. He also claimed that lower oil prices would help end the war in Ukraine, although the complication here is that Russia remains a key member of OPEC+. Another conflict here is that higher OPEC production could threaten US output.

Another announcement, which so far lacks clarity, is his plan to refill the SPR “right to the top”, which implies adding about 300 million barrels back in. The key question here is when and how. If we were to assume a 1 year long process using domestic grades only, the fill rate would exceed 800kbd – enough to drive up oil prices and lower exports. However, if the process drags out over his presidency, then the impact will be considerably more muted, at circa 200kbd. It also remains to be seen what funding will be available for such purchases which would cost around $22.25 billion at today’s prices.

Trump has, as expected, come out swinging in favour of domestic oil and gas production and has already pledged to remove any barrier to drilling for “liquid gold” including the removal of and offshore drilling ban and also opening up the Alaskan wilderness for exploration. However, it is unclear whether oil companies will respond at scale to supportive oil and gas policy. The scaling back of EV mandates and a moratorium on offshore wind also tip the balance back towards hydrocarbons, although it remains unclear to what extent this will impact oil demand.

Tariffs have remained high on the policy list but are yet to be confirmed. The markets are still none the wiser as to whether the proposed 25% tariff on Mexican and Canadian imports will be implemented, although Trump did confirm that a federal investigation would be conducted first. From an oil perspective the impact would be seismic, with 600kbd of Mexican crude and DPP exports impacted and likely redirected. For Canada, the interdependency between the countries’ energy sectors is even greater, with Canadian exporters lacking alternative markets unless re-exports via the US Gulf are exempt, whilst many US refiners depend on discounted Canadian barrels for their profitability. The EU has also been threatened with tariffs if they do not buy more oil and gas; yet the irony here is that the EU is buying more US energy than ever before.

For the wider shipping markets, factors like the Panama Canal, possible tariffs against China, and policy towards Chinese built ships are all points of concerns. Yet again here, key details are lacking. More time and clarity are needed to ascertain the real impact of Trump’s presidency, but for now it looks like threat of sanctions and tariffs as well as support for oil and gas will have to endure.

US Crude Production (mbd)

Crude Oil

East

After last week’s excitement with VLCCs witnessing the highest levels in over 7 Months, owners will have been hoping it carried through to this week, however, that was not the case as charterers were slow to emerge with fresh stems. A healthy amount of tonnage was available for current dates which provided charterers with options when they did come searching for a ship. Sentiment unfortunately weakened and we have seen a drop in levels. Next week is holiday time for much of the East and so while this does not usually kill off activity too much, it may create a little disruption. Today we are calling AG/China WS50 and AG/USG WS30 on 2025 flats.

The AG Suezmax market seems to have fallen away with a few failing at higher rates and a loss of momentum towards the end of this week. We anticipate next done AG/West will be approaching 140 x WS60 via C/C for modern approved tonnage. Runs heading East remain competitive and charterers will be looking to fix if not break 130x WS115 next week.

In Aframax markets in Asia, chartering activity dipped towards the tail end of the week, causing owners’ momentum to be subdued. However, private cargoes were being worked as some ships were taken off the list. The TD14 prints 80 x WS117, closing higher than it started the week. A tight AG list should see more ballasters from Asia make up for tonnage. Expect rates to remain steady moving into Chinese Lunar new year.

West Africa

VLCCs in the WAF region faced similar issues to the AG with fresh cargoes slow to emerge. Sentiment at the start of the week was still positive but with every quiet day that soon diminished. Rates were easing elsewhere and when charterers did step out to cover, they were faced with a slightly easier tonnage list and owners who were more willing to work market levels. Next week owners will be hoping that with a step down in levels more charterers will emerge to cover end decade February stems. Today we are calling WAF/East WS57.

Suezmax markets in West Africa have an uncertain feel to them, a few failing late today will put on some extra pressure. For a TD20 run charterers will be looking to push the market down to 130 x WS75. There is still a feeling among many that we have seen the bottom of the market, and there will be resistance from owners to fix below current levels.

Mediterranean

Where tonnage has built up in the Mediterranean, Suezmax owners with early positions have done a good job of securing employment with part cargo enquiry from CPC and the Med this week. At the time of writing this TD6 looks to be on subs at a WS90 level. However, come Monday tonnage looks to replenish steadily, and it feels like we still need a further upturn in enquiry for owners to make further gains here.

Owners’ hopes of sustaining positive momentum for consecutive weeks started well on Monday, with several stems ex-North Africa working in the end/early window. However, it was CPC that provided the most significant support to owners, with rates reaching highs of WS155 as availability tightened considerably. XMed rates firmed further, marking the final surge of this cycle before Suezmaxes softened, prorating below the equivalent of an 80kt fixture. Ultimately, Aframaxes adjusted down from their peaks in sympathy as both support and cargo volumes declined. Meanwhile, surrounding markets in the UKC and USA also faltered, making further rate erosion increasingly likely into the next days.

US Gulf/Latin America

VLCCs in the USG region were slow to get going at the start of this week with President Trump’s inauguration taking place. As rates were easing in the surrounding regions the hope was that the USG would be the driving force to pick these regions back up but that was not meant to be and some downwards correction was made. There was some encouragement as $8.75mill was done on TD22 today, signifying an ability for owners to stop any further damage, but more volume is needed if forward dates are to offer similar resistance. The Brazil export market was dormant this week with little to write home about, a few deals done under the radar and levels moved back down to previous numbers seen 2 weeks ago. Today we are calling USG/China $8.75m & Brazil/China WS56.

Aframax market in the USG bottomed out at WS115 for TA moves. Most deals done this week were under the radar as charterers controlled the flow to keep sentiment soft.  Couple that with a mix of Oil Co. relets and the result remained soft. We still have a healthy tonnage list that needs clearing out before any strong movement can be realized; would expect a steady/soft next week.

North Sea

North Sea charterers have been flirting across different sizes with little action. The Aframax market here is trading sideways, and levels sit at WS110 with owners arriving from neighbouring markets opting for the immediate ballast away. Expect more of the same next week.

Crude Tanker Spot Rates (WS)

Clean Products

East

Frustrating week for LR2 and LR1 owners as we head into Chinese New Year. The hoped pre-rush of stems never materialized, the missing volume especially highlighted on the LR1s will put pressure on owners over the next week. The tightness and flurry of activity from last week on the LR2s has subsided and expect that charterers will be looking to test westbound below $4.0m given the 75 x WS140 on subs TC1 now. The LR1s will come under pressure next week and we assess TC5 circa 55 x WS137.5 and UKC to be tested at the $2.85m levels.

MRs East of Suez traded sideways for the most part as this week kicked off as drip fed cargoes just about managed to keep the top of the list ticking over. By mid-week, however, these lower levels (TC17 at WS190) failed to stimulate any uptick in inquiry and as a result last done came under pressure with a market quoted cargo going on subs 5 points lower. Going forward, expect to see resistance from owners to any further drop in levels however a soft SE Asia market will only serve to add positions to a lengthy AG list.

Mediterranean

It’s been a week of two halves for the Handies here in the Med with the first being busy and the second not so much. 30 x WS175 was the call for XMed on Monday morning but with the list tight after a weekend of poor weather/delays, owners were bullish from the off. This combined with a good influx of cargoes Monday-Wednesday saw rates firm around 50 points with 30 x WS225 repeated. Since then, however, enquiry levels have been lacklustre, and the list has been able to replenish. Last done remains around the 30 x WS225 mark but with nothing currently outstanding and the weekend approaching we are expecting to see a softening here.

Finally, to the Med MR market where rates this week have been a real mixed bag with most of the action taking place under the surface. Med/TA now finds itself at the 37 x WS150 mark with WAF tracking it at a reduced 20-point premium. Heading into the weekend we see nothing outstanding and with the list starting to lengthen expect pressure to continue come Monday morning. 

UK Continent 

After a positive week passed on MRs in the UKC, owners walked into the office on Monday with some good levels of fresh enquiry there was plenty of reason to expect further gains from the 37 x WS180-185 for TC2. Unfortunately, this didn’t go to plan and charterers turned off the cargo tap. A few things have continued to occur under the radar, but this hasn’t been enough to hold onto rates and come Friday we are staring at a TC2 market around the 37 x WS160 mark. XUKC runs were drip fed into the market with Handies and MRs sitting close on $/tonne and WAF has had questions but nothing substantial. Moving into next week we start to see a few more vessels arriving laden as well as a few in ballast for the first time in a while, with the potential now with fresh enquiry to see fresh negativity. 

There has been limited Handy supply available on the front end of the tonnage list throughout most of the week as charterers targeted vessels under the radar which kept a lid on freight. TC23 has traded around the 30 x WS190-195 mark and 30 x WS180-182.5 for UKC/MED although with a quiet end to the week and supply expected to be replenished come Monday an injection of cargoes is required here. 

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Despite a slow start to the week in UKC, it did not take long to see the market somewhat ignite with a flurry of activity snapping up several prompt units in play. Hitting the midweek point enquiry already began to stall with levels tested down to the WS165 mark. Lesser approved units began to ballast in search of their next employment. Rates managed to hold around the mid WS160’s as we headed into the backend and it will not take much activity to be seen early next week to quickly see levels rise and owners grab the upper hand.

An overall sluggish week in the Med as fresh opportunity was hard to come by for owners. Eventually the pressure built took a toll on rates as negative correction was witnessed. We leave the list with prompt positions remaining plentiful as further pressure is expected to be added.

MR

Naturally sized units located in the UKC proved hard to come by for the duration of this week. Charterers were forced to monitor surrounding regions and larger vessels willing part cargo stems for coverage. Next week expect laycans to be worked ahead of the natural window for safe coverage.

Full sized enquiry remained a luxury for owners in the Med this week with activity stalling. Rates trading between the WS100-110 levels depending on approvals. Charterers have a healthy number of options remaining well spread across the region.

Panamax

Enquiry in both regions proved to be somewhat elusive this week and prompt tonnage remains readily available. States market continues to soften as owners see no value in ballasting. Expect owners to throw their hats in the mix for part cargo opportunity.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeJan 23rdJan 16thLast Month*FFA Q4
TD3C VLCC AG-China WS-2354774158
TD3C VLCC AG-China TCE $/day-28,25031,25059,50018,50030,750
TD20 Suezmax WAF-UKC WS-1077868281
TD20 Suezmax WAF-UKC TCE $/day-6,25024,00030,25029,25024,250
TD25 Aframax USG-UKC WS-20115136159142
TD25 Aframax USG-UKC TCE $/day-6,50021,25027,75038,75026,750
TC1 LR2 AG-Japan WS-34140174103 
TC1 LR2 AG-Japan TCE $/day-10,75031,00041,75018,750
TC18 MR USG-Brazil WS-36166202250179
TC18 MR USG-Brazil TCE $/day-6,25017,75024,00035,00018,000
TC5 LR1 AG-Japan WS-35139175111133
TC5 LR1 AG-Japan TCE $/day-8,75019,25028,00013,25015,250
TC7 MR Singapore-EC Aus WS-5174178159178
TC7 MR Singapore-EC Aus TCE $/day-25016,75017,00014,75016,250

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

Bunker Prices ($/tonne)

wk on wk changeJan 23rdJan 16thLast Month*
Rotterdam VLSFO  -5542547516
Fujairah VLSFO  -10580590546
Singapore VLSFO  +0598598557
Rotterdam LSMGO  -6700706650

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