Keep Rollin

Yesterday OPEC+ made the seemingly inevitable decision to roll over production cuts for another 3 months, acknowledging that the current fundamentals do not allow for additional OPEC+ production. In fact, with the fundamentals suggesting a well-supplied market for 2025, the group further slowed the pace of production increases.

As the chart shows, there are several layers to the current OPEC+ production cuts. The most recent round of cuts of 2.2mbd, which were originally implemented in November 2023 will now stay in place until at least April 2025, with production gradually phased back in by September 2026.

An additional cut made in April 2023 of 1.65mbd will be extended until the end of 2026, whilst the 3.7mbd cut put in place in October 2022 was not specifically mentioned and is likely to remain in place indefinitely, or until the current policy changes. The UAE had been given a higher quota for 2025 (+300kbd) which remains, but this will be phased in over 18 months, starting from April next year. Production rises could also be limited by compensation cuts for members who have failed to meet their output targets over the past year, which may further limit the upside in OPEC+ exports. However, this will remain a delicate issue next year, with some countries struggling to keep production under control. For example, field expansions in Kazakhstan will see the country’s capacity increase by 260kbd in the second quarter, whilst any resumption to flows from Kurdistan could also impact Iraq’s efforts to comply. As OPEC+ frequently say, the plan can be adjusted at any time to reflect market conditions.

Whilst expected increases in non-OPEC supply next year suggest there will be little improvement in the outlook for OPEC+ oil production, geopolitical developments could quickly change the picture. With stricter sanctions on OPEC member Iran expected next year, any significant decline in Iranian supplies could open the window for the rest of the group to boost output. Likewise, if a tougher approach towards Russia’s oil exports is taken, then we may see a higher “call on OPEC” to step up output.

So, what does this mean for tankers? Overall, perhaps not a lot. Given the oil supply/demand balances for 2025, further delays to OPEC+ output increases were anticipated. As such, crude tanker demand growth will be driven by expanding production in the Atlantic basin, which typically generates more tonne miles than production from the Middle East. If OPEC+ were to press ahead with production increases, then the US might have to act as the swing producer if prices fell, putting pressure on long haul exports from the US. Further, any increases in Russian production would have likely benefitted the “dark fleet” opposed to the mainstream tanker market. A “market share” strategy, whereby OPEC+ oil floods the market, was always and still is, a key risk, yet for now the producer group continues to show remarkable cohesion.

OPEC+ cuts (kbd)

Crude Oil

East

The start of the holiday season did not bring any festive cheer to the VLCC market as freight rates continue to hover around yearly lows. Activity remains very limited and the OPEC+ news has not helped the mood amongst owners, as such we are seeing more vessels ballast westwards in the hope of better prospects in the Atlantic. We may now be close to the bottom of the current slump but it’s hard to justify a reason for any upturn for next week with the current fundamentals and today we are calling AG/China in the region of WS43 and 280 AG to USG fetching WS29 level via the cape.

In the East on Suezmaxes, Basrah/West activity has been very low this week and amongst very few outstanding cargoes, charterers should expect to pay somewhere around 140 x WS52.5 via C/C. Rates to head East remain under pressure and part cargoes still look attractive for VLCC owners. Market levels today are approximately 130 x WS95.

In Asia on Aframaxes, demand continues to be subdued along with a healthy amount of tonnage available for natural fixing dates. Charterers firmly in the driving seat moving into the following week as the TD14 prints at 80 x WS120. Regional enquiries were quick to be covered with a Thai-bound run fetching multiple offers. But if the delta between the AG and Indo region continues to widen, expect more ballasters towards the Middle East and a refreshed Asian list.

West Africa

We experienced another quiet week on VLCCs in West Africa as charterers sat on the fence and rates weakened. With the onset of a rush of eastern ballasters entering the zone, January will be a testing period for owners here. On a more positive note, Suezmax stems have increased and with stronger rates on the horizon charterers may look to take VLCCs which are almost better value after recent downward movement. Off natural dates we estimate that on today’s market a 260 WAF/China run would pay around WS48 level.

Suezmax markets in West Africa are steady, and for a TD20 run today, we estimate rates to be around WS95 but for a good run there is probably a little room to chip away at this number. Those asking for more options and more niche discharge locations will likely have a tougher time finding a ship but there are still prompt vessels around.

Mediterranean

In Suezmax markets in the Med, CPC is pretty much covered up to end-month which is putting a little bit of a dampener on the Aframax market for East Med. Though there is lots of waiting time, owners will be reluctant to break below WS100 for TD6. Libya/East runs have a few of the regular players around to soak up any cargoes, rates will hover around a level of $4.8M and we don’t foresee too much difficulty finding a ship.

In Aframax markets a disrupted week due to Xmas parties did nothing to help owners and charterers get a grip on market conditions, with lots of off market deals concluded and largely unchanged. Conference rates of WS145 for vanilla XMed was achieved for most voyages but the usual discounts for Libya and for older ships were observed with lows of WS140. CPC voyages maintained a healthy delta to the Med with rates in the high WS160s as bad weather maintained Turkish Strait delays and saw availability remain thin. Furthermore, Suezmax activity allowed that sector to push on. Looking forward the going remains balanced and a firmer US market provides owners with some leverage, albeit potentially only for a short while.

US Gulf/Latin America

The expected increase in VLCCs activity after the Thanksgiving holiday did not materialise in the USG export market as the January programme has proved to be a quiet one so far. However, towards the end of the week freight rates seemed to have bottomed out and even showed a slight uptick mainly supported by increases in smaller tonnage business. The Brazil market was more active, but rates weakened mainly due to the downturn in other zones, though with the list beginning to thin out for earlier dates, this could start to turnaround next week. Today we expect a USG/China cargo to pay in the region of $7.2m and a Brazil/China run is around the WS47 level.

Aframaxes ex USG went for a run this week!  Nominally up about 60% on the week due to a short tonnage list earlier in the week with minimal ballasters and charterers tripping over each other. We would expect many ballasters for next week’s list due to weaker Med and NSea markets, which should let out some of the steam coming into the holiday season.

North Sea

Despite action, this week has crab walked smoothly along without seeing anyone push or any fundamentals to do so. XNSea is trading at WS125 and despite the long nights and bad weather there is a low likelihood of an uptick in the near-term. Tonnage is relatively balanced for the time being, with those who left the region chasing a short-lived US spike not affecting local tonnage supply.

Crude Tanker Spot Rates (WS)

Clean Products

East

Finally, the taps have been turned on. A properly busy week for the LRs in the East. Some very clever chartering has seen single quoted stems taking 3 or 4 units and as such the lists are going to look very different come Monday. Rates have started to edge up, however, the retest will come next week. For now, TC1 at 75 x WS112.5 and West heading towards $3.5m on next done. For the LR1s TC5 at 55 x WS112.5-115 and West at $2.6m levels. Expect to see another busy week where owners will see if they can have a final push before the year closes out.

The MRs East of Suez have fared better for the most part this week as incremental pushes on levels have been seen. East and West runs have remained quiet, however, TC17 and short haul runs have supported owners attempts to push on. A tighter list to start the week on Monday saw WS185 East Africa repeated, and we close the week here with WS195 on subs. A quieter end to the week will give charterers an opportunity to take stock and see where opportunities lie.

Mediterranean

It’s been an active week for the Handies here in the Med, and we began the week with XMed trading at the 30 x WS200 mark but with fresh tonnage on Monday morning rates soon came under pressure. 30 x WS150 was being repeated by midweek but towards the end of the week the list grew tighter, with a handful of fresh cargoes coming into play. This combined with incoming bad weather has seen 30 x WS250 achieved for BSea/Med and XMed. Market firm into the weekend.

Finally, to the Med MR market where it’s been a subdued week with most activity taking place off market. Med/TA has been bouncing around the 37 x WS120-125 levels all week with WAF tracking at its usual 30-point premium. Heading into the weekend a couple of cargoes remain and with the Handies in the Med busy there may be some potential here next week.

UK Continent 

A relatively active week passes for MRs in the UKC with unsurprisingly quite a few deals being done under the radar. This has cleared several ships out from the top of our lists, and we now see some improvements in the WAF rates, giving optimism to the market. 37 x WS180 is seen but on the other side of the coin, we only see 37 x WS122.5 on subs for TC2 with owners looking to head to the improved TCEs of the USG. Short XUKC will remain desirable with owners in hope of an improved market, and we wouldn’t be surprised to see Charterers try to clear the books before Christmas festivities.  

In the Handy market, with Christmas party week happening in London and most of the market away from their desks, it has felt like a rather disruptive week with fixing happening under the radar throughout. XUKC volumes have been lacklustre as levels close at 30 x WS150 but with MRs/TC6 looking set to improve, the feeling is TC23 may also follow suit. Potential but very much subject to demand.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The North has seen another week with little activity, the list lengthens, and idle days begin to accumulate. Last done for an XUKC run sits at 30 x WS205, however, as we look to the next test, levels will likely come off to around the 30 x WS200 mark or slightly lower. Bad weather is on the way over the weekend and with some ports in ARA closing, which could cause delays preventing further tonnage from opening over the weekend.

In the Med, activity came back to the market towards the end of the week, helping to clear most of the tonnage that was building at the top of the list and bringing with it somewhat of a revival. Rates here currently sit at 30 x WS160. Unfortunately for owners, the momentum appeared to have faded by Friday. If levels are to remain steady and look to firm, activity will need to get off to a fast start next week.

MR

A disappointing week for activity at full stem as enquiry struggled to surface in the North. With tonnage working its way up the list and a softening of rate ideas in the Handy market, we now assess XUKC runs at the 45 x WS145 level, but a fresh test is needed to see the true rates. In the Med it’s a similar story, as usual, units have found employment by way of part cargoes. In prorating these part cargoes, ideas sit around the 45 x WS115 mark but like in the North, a fresh test is needed here.

Panamax

Panamaxes over in Europe have had little to shout about but levels feel steady as recent tests have left something to build on. Units are expected to open early second decade but in the North options look thinner. Over in the USG, levels have finally begun to firm – mainly off the back of firming regional markets. An eye-catching USG/down run has provided a much needed boost for owners leaving sentiment here firmer.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeDec 5thNov 28thLast Month*FFA Q4
TD3C VLCC AG-China WS-243455352
TD3C VLCC AG-China TCE $/day-3,00020,50023,50031,00025,750
TD20 Suezmax WAF-UKC WS692869590
TD20 Suezmax WAF-UKC TCE $/day4,00035,50031,50036,25030,250
TD25 Aframax USG-UKC WS72192120160157
TD25 Aframax USG-UKC TCE $/day26,50050,75024,25038,25034,500
TC1 LR2 AG-Japan WS-8112119105 
TC1 LR2 AG-Japan TCE $/day-3,00021,50024,50018,000
TC18 MR USG-Brazil WS18224207222212
TC18 MR USG-Brazil TCE $/day3,25029,75026,50030,00024,250
TC5 LR1 AG-Japan WS-2112114122119
TC5 LR1 AG-Japan TCE $/day-75013,00013,75014,75012,750
TC7 MR Singapore-EC Aus WS0160160169173
TC7 MR Singapore-EC Aus TCE $/day-25014,50014,75015,50014,000

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

Bunker Prices ($/tonne)

wk on wk changeDec 5thNov 28thLast Month*
Rotterdam VLSFO  +1501500521
Fujairah VLSFO  +2541539563
Singapore VLSFO  +9555546585
Rotterdam LSMGO  -3647650653

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