Long View

The IEA has just updated its long-term view of oil markets. As usual, the agency presented different scenarios and cautioned that its outlook does not provide a forecast of what will happen; instead, it offers several scenarios that explore different possible futures, depending on certain assumptions at government, industry, and consumer level. The Stated Policies Scenario is perhaps the most realistic, based on the latest market data, technology costs and incorporates the prevailing policy settings in countries around the world.

In this scenario, the IEA expects global oil demand to peak before 2030 at just under 102 mbd (excluding biofuels), up by circa 3 mbd from 2023 levels. Over the period, strong gains are seen in oil demand from the petrochemical, aviation and shipping sectors, whilst road transport demand is 0.6 mbd higher in 2030 relative to 2023 levels. Yet, global consumption still peaks, and that is primarily due to lower demand from buildings and power, where consumption declines by 2.4 mbd, with Middle East oil demand in the power sector declining by about 900 kb/d to 2030. Beyond 2030, global oil demand declines, but the rate of decline is quite slow, with consumption down to 93.1 mbd by 2050 (less than 9% relative to 2030). Nonetheless, a significant decline is seen over the period in road transport demand due to accelerating uptake of electric vehicles, whilst oil demand in building and power also continues to decline. Yet, this is in part offset by continued increases in demand from the petrochemical, aviation and shipping segments.

The IEA also expects stark differences in regional oil demand patterns. Demand in North America and Europe is expected to decline notably over the forecast period, down by 14.4 mbd in 2050 vs 2023, while continued growth in consumption in South America, Africa, the Middle East and Eurasia is projected to partially offset the decline in advanced economies. In Asia, demand largely remains flat, down by 0.4 mbd by the end of the outlook period, with the anticipated decline in Chinese demand more or less balanced by continued growth in other developing Asian economies. 

Oil production is also expected to fall in all regions except Latin America and the Middle East by a sizable 14 mbd by 2050. The decline in crude production considerably outstrips the potential loss in demand, suggesting a rising reliance on the Middle Eastern crude, with regional crude trade to Asia continuing to augment amid declining crude production in SE Asia, India and China.

Major changes in the global refining industry are also seen. Pressured by falling demand for road transport, European refining runs are projected to decline by circa 4.3 mbd between 2023 and 2050. A smaller decline is projected in North American refining runs, down by just 2.6 mbd over the period, considerably lower than the anticipated decline in demand. With Latin American oil demand still expected to grow over the forecast period, this suggests that US Gulf refiners may find more opportunities exporting products into LATAM. Growing demand in Africa could also offer product export opportunities, as anticipated increases in demand are greater than new refining capacity coming online. In Asia, refining runs are at similar levels in 2050 relative to 2023; yet they increase by around 1 mbd by 2035 before declining by a similar number by 2050.

All in all, the latest IEA long term report reaffirms that the global oil markets are likely to be transformed over the next two decades. However, despite an anticipated decline in world oil demand, major differences in regional supply and demand patterns suggest tanker trade will still have a critical role to play for decades to come.

World Oil Production Outlook (mbd)

Crude Oil

East

For VLCCs in the east the week started off with a couple of market cargoes working on the surface as we move firmly into the 2nd decade. The tonnage list has remained well stocked throughout the week and the minimal amount of demand seen was easily manageable. As we moved through the week the pressure of a decent number of ships had started to show with rates being chipped away at. Looking ahead to next week shows a similar picture, however, as we edge closer to WS50 many will be hoping the floor will soon be found. Today we are calling AG/China in the region of WS52 and 280 AG to USG fetches WS31.5 via C/C.

Basrah/West Suezmax cargoes today will have a good number of candidates and charterers will be looking to chip away at last-done. Next done we estimate rates will be around 140 x WS62.5 via C/C. Rates to head east remain under pressure as a weak VLCC market will have the larger size looking to take part-cargoes. Market levels today are approximately 130 x WS115, though charterers are likely to chance their arm for less.

For Aframaxes in Asia, as expected, the week started slow and ended on a softer note owing to a short week. Indo/North saw a new floor at WS138 with no enquiries on TD14 this week. A couple of short haul runs kept the market awake but lacklustre demand coupled with a relatively wide tonnage list dampened owners’ hopes of maintaining last done levels. However, bad weather conditions in the South China Sea are causing delays to vessels’ itineraries, as charterers are now forced to look at replacements which could lend support to weak sentiment. The AG has been uncomfortably quiet with the lack of activity allowing the list to replenish and rates to come off the boil. The week ends with AG/East at 80 x WS162.5.

West Africa

The week ended on a negative note for VLCCs in WAF. There has been a lack of decent flowing activity so the chance of building any momentum was minimal. When charterers did step out to cover, they were met with a healthy number of owners willing to do TD15 runs which has allowed further pressure to be applied and rates to be squeezed. On today’s market a 260 WAF/China would pay in the region of WS54.

Suezmax markets in West Africa are steady. For TD20 today, we estimate rates to be around WS95 and feel there will be resistance at these levels. There is ample tonnage to cover demand for now, as a slow week and ships berthing over the weekend will resupply the list.

Mediterranean

TD6 has seen quite a sharp drop on last-done today but market levels will look to steady, and possibly even push above WS102.5 next week. Libya/East runs have a larger number of vessels looking to lock in for the long voyage, and charterers will be looking to push below $4.5M.

In Aframax markets, it was a week to forget from an owner’s perspective as what can only be described as a catastrophic negative swing as far as daily earnings are concerned occurred. Owners being forced to compete, and perhaps even Charterers were surprised by the levels of interest received for stems on offer, and particularly for this time of year. Ultimately this resulted in levels between deals collapsing some 35-40 WS points for a benchmark Ceyhan, with pressure growing as availability by far outstripped demand. A low of WS112.5 ex Libya was eventually seen but for now at least the decline seems to have halted. Looking ahead, although current sentiment looks to endure a little longer, seasonal factors of weather delays and a general pickup in demand should soon aid recovery. Nevertheless, hopes for a strong Q4 have been dented by now.

US Gulf/Latin America

Freight rates of USG VLCCs softened this week as activity was not enough to keep levels at bay. Charterers have now started to step out with December stems and owners will want to see some momentum build with the hope freight rates will eventually follow suit. The Brazil export region has been quiet on the surface this week with only a couple of cargoes reportedly covering. Sentiment remains weaker which was to be expected with the surrounding regions all in a similar position. Today we expect a USG/China cargo to pay in the region of $7.8m and a Brazil/China run is around the WS53 level.

North Sea

Although we have had some general volatility for Aframaxes in the West this week the North has been slightly less turbulent than its neighbours. Tonnage is still long but over the weekend we can expect an exodus of sorts with vessels heading back over to the States and some Med. Levels now sit in the higher WS120s and can expect to flatten out next week. We can expect delays to creep up as we move into November and a new floor for the last part of the year has likely been put in.

Crude Tanker Spot Rates (WS)

Clean Products

East

A painfully quiet week for the both the LR2s and LR1s in the AG. A total lack of stems has ensured that when a cargo does enter the market it was competitively fought after. As such charterers are currently holding all the cards. The front end of both of lists is well supplied with tonnage and will require a huge influx of stems for owners to see any improvement on the current state of the market. We see TC1 at 75 x WS105 and Jet West at $3.7m. TC5 at 55 x WS125 and Jet West at $3.2m. Owners will really be hoping to see more cargoes very early next week.

Despite another lacklustre week for the MRs east of Suez, activity has picked up once again driven largely by TC17/SAFR runs since that benchmark route dropped to WS170. East has been corrected down with WS130 repeated and xAG down to $150k l/s as owners take the opportunity for a gap filler in the hope of some improvement by end month dates. With some cargoes failing or going o/p the list remains well stocked but one positive that can be taken is the fact that levels have traded largely sideways/bottomed for now. All eyes are on next week for a pre-Bahri week rush in fixing.

Mediterranean

All in all, it’s been a lacklustre week for the Handies here in the Mediterranean as supply continues to outweigh demand. We did see some consistent enquiry midweek with a handful of ships put on subs, but with the list oversupplied for the current window rates have come under pressure since Monday. 30 x WS140-145 is now the call for xMed depending on the cargo with BSea/Med tracking at a 25-point premium. Quiet as we near the weekend.

Finally, to the Med MR’s where we saw some good activity levels in the first half of the week but with TC2 weak the Med has been able to kick on. Med/TA has traded at 37 x WS100 for most of the week with WAF tracking at a reduced 20-point premium. At the time of writing there are no cargoes outstanding and with TC2 at 37 x WS85 it is likely we see some pressure creep in here.

UK Continent 

Another rather unfulfilling week comes to a close for the UKC MR sector with a limited number of cargoes being drip fed into a well-stocked tonnage list. TC2 slipped back down to the 37 x WS85 mark and with fewer short haul runs being quoted we saw a sizable correction on those rates back down to the traditional 10-point premium of 37 x WS95. WAF, like all other routes remained quiet too with 37 x WS115 seen ex Baltics and a fresh negative test still required ex UKC, but to sum it all up we still very much sit on the floor here. 

Even though Handy volumes have been lacking this week, owners have been able to hold the line at around last done levels throughout (30 x WS130ish for XUKC). The main issue for Handy owners has been the inactivity and oversupply in the MR sector which has resulted in 37 x WS95 being paid for XUKC which equates to 30 x WS117 on the prorate. Currently MRs remain the more competitive option for short haul runs and Handies will have to readjust their fixing ideas to compete on stems here. MR driven.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

It’s been a steady week for Handies in the north as consistent activity has cleared tonnage at the top of the list, although this has seen levels soften to 30 x WS197.5. The list is in much better shape for owners; however, charterers still have availability to choose from. We expect rates to remain steady early into next week.

In the Med, the same cannot be said, and the little activity we have seen has been mainly carried out off market leaving owners and charterers alike somewhat blind. We assess XMed runs at the 30 x WS162.5 level given the oversupply of tonnage to choose from as we now look to second decade fixing windows. Enquiry will need to arrive thick and fast if levels are to find a floor soon.

MR

A positive week for MR enquiry at full stem in the north with three fixtures to report, the most in a good while. Owners held their ground at the 45 x WS150 mark for XUKC runs with cargoes heading to the Med fetching WS145. Tonnage is now tight with few options to choose from creating a platform owners can build on.

Similarly to the Handy market, the same cannot be said in the Med. Owners have seen little enquiry both part cargo and at full stem leaving tonnage available at the top of the list. We expect levels to come under further pressure with charterers looking to test levels down from current ideas of 45 x WS125-130.

Panamax

The market has heard of some long-awaited details on a TA fixture this week with 55 x WS130 reported, providing a fresh benchmark on which to base future deals. Tonnage is thin until mid-month, leaving few options for charterers should enquiry surface before then. Over in the USG, levels have remained steady as tonnage early in the week was cleared by private cargoes helping to lend support to the market. Unfortunately for Owners, this likely won’t last as surrounding Afra markets soften and will likely soon look to provide better value.

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 31stOct 24thLast Month*FFA Q4
TD3C VLCC AG-China WS-453575456
TD3C VLCC AG-China TCE $/day-4,50031,00035,50033,50030,250
TD20 Suezmax WAF-UKC WS-395987397
TD20 Suezmax WAF-UKC TCE $/day-1,25036,25037,50023,00034,250
TD25 Aframax USG-UKC WS-9160169101174
TD25 Aframax USG-UKC TCE $/day-3,00038,25041,25017,00040,250
TC1 LR2 AG-Japan WS-15105120148 
TC1 LR2 AG-Japan TCE $/day-5,00018,00023,00033,750
TC18 MR USG-Brazil WS48222174171218
TC18 MR USG-Brazil TCE $/day9,75030,00020,25020,50026,500
TC5 LR1 AG-Japan WS-6122128170133
TC5 LR1 AG-Japan TCE $/day-1,25014,75016,00028,00015,750
TC7 MR Singapore-EC Aus WS-10169179179205
TC7 MR Singapore-EC Aus TCE $/day-1,50015,50017,00017,50019,250

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

Bunker Prices ($/tonne)

wk on wk changeOct 31stOct 24thLast Month*
Rotterdam VLSFO  -19521540526
Fujairah VLSFO  -26563589556
Singapore VLSFO  -18585603573
Rotterdam LSMGO  -24653677610

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