Contents
Table of Contents
Made in America
American crude production has gone from strength to strength in recent years, despite a recent slowdown. After a low of 5 mbd in 2008 and worries about the dependency of the US on imports, the shale revolution massively increased production capabilities over the last decade. The EIA saw crude production at 13.5 mbd last week, a new record. Average production so far this year is 13.2 mbd, up from 12.8 mbd over the same period last year. A possible Trump presidency is seen as being supportive of even greater oil production. Trump has pledged to roll back restrictions on drilling and permitting which were implemented under the Biden administration, as well as to streamline deregulation and end any EV mandates or green energy incentives.
Growing US crude production has been a boon for crude tanker markets. Seaborne exports increased by on average 400 kbd annually between 2013 and 2023, going from a measly 64 kbd to 4 mbd. A large share of this crude went into ARA and the Far East, providing a steady tailwind to tonne mile demand. In the same period, however, seaborne imports shrunk from 5 mbd to 2.8 mbd, with the share of Venezuelan and Middle Eastern crude shrinking markedly. This has left mostly short haul imports from the rest of the Americas.
This year has bucked this trend, with exports essentially flat and imports up slightly from 2023, despite growing production. The divergence is largely explained by growing refinery utilisation and resulting CPP exports, which increased from 2.28 mbd in 2023 to 2.48 mbd so far this year. Refilling of the US SPR has also played a role, growing by 30 mln bbls (as of October 11th). In the long term, the IEA is forecasting oil production, which includes NGLs, to grow from 19.44 mbd in 2023 to 21.5 mbd by 2030. Meanwhile, demand is expected to peak at 20.41 mbd in 2025 and then decline to 18.91 mbd by 2030. This leaves a growing supply and demand imbalance, of which most will be destined for long haul export on tankers.
Recent reports indicate that WTI crude originating in Texas and New Mexico, which accounts for nearly all recent production growth, is getting lighter, decreasing its popularity with refiners. This could lead to a greater blending requirement with heavier grades before any processing into clean products can occur. A sizeable share of imports of Medium and Heavy grades has traditionally come from Mexico and Canada. However, as recently highlighted in one of our reports, imports from Mexico are at its lowest point in over 10 years and will likely continue to decline due to decreasing production and the ramp up of the Dos Bocas refinery. This lack of Mexican supply of heavier grades could result in growing imports from Canada or further afield, a potential further tailwind for tanker tonne miles. If USWC refineries replace heavy AG grades with TMX crude, more Middle Eastern crude could find its way into the USG.
Overall, ever-growing US oil exports seem unlikely to slow down anytime soon. If the IEA forecast of increasing production and a slowdown in consumption comes true, it is possible that the pace of export growth will increase going forward. As demand growth is strongest in East and Southeast Asia, this would largely benefit long haul trade on VLCCs. Further policies implemented by a possible Trump administration could add fuel to the fire, though with global crude supply already looking to outstrip demand in 2025, this remains to be seen.
American crude exports (kbd)
Crude Oil
East
VLCC owners can be pleased with themselves for keeping rates at current levels during what was a slow-paced week, although fixture numbers suggest there was a lot of under the radar activity. The low level of activity that we are seeing towards the end of the week does not bode well and rates could come under pressure next week unless there is a pickup in activity. The tonnage list does look balanced and today we are calling AG/China in the region of WS57 and 280 AG to USG fetches WS34.5 via C/C.
For Suezmaxes in the AG Basrah/West rates remain stable today with a healthy number of ships looking to firm up on itinerary for next week. Charterers should expect to pay in the region of 140 x WS65 via C/C. Rates to head East remain competitive for those who can use older units, though for those restricted to modern vessels, rates are likely to be in the region of 130 x WS125 as these vessels tend to have a heavy preference to come West at the moment.
Aframaxes in the Far East end the week softer than it started. Charterers have covered up to end of the first decade as TD14 stands steady at 80 x WS145 and with the list looking to replenish, sentiment is swinging in charterers favour moving into next week. The AG remains firm after TD8 jumped 12 points since the start of the week. The thin list of well approved quality tonnage up to mid-month has left charterers needing to be cautious as we end the week with AG/East at 80 x WS163.5.
West Africa
The week ended on a positive note for VLCC owners as rates saw an uptick despite limited activity in the area. There is expectation that the 3rd decade will be busier, so sentiment remains on the strong side despite the more negative noise coming from adjacent zones. A resistance amongst some owners to give East options is inflating the rates on long haul voyages. However, owners need to be wary of tonnage build up with ever more East ballasters entering the market. The expectation is that today a 260 WAF/China would pay in the region of WS63.
Suezmax markets in West Africa are steady. For TD20 today, we estimate rates to be around WS97.5 for a cargo without options. Though tonnage remains tight on the early side and there are ships fixed on some tight itineraries. This could play into the hands of owners if we see a few late runners.
Mediterranean
TD6 has seen limited levels of activity this week, and there are quite a few early ships that would be keen to fix today. We estimate rates at WS112.5 which could be tested. Libya/East remains relatively flat at around $4.7M with the usual players having multiple ships in play and charterers shouldn’t have too much difficulty getting their way today.
Aframax owners in the Mediterranean market have not had things their own way this week despite latent optimism from the last. On the face of it, the tonnage list looked lengthy at the start of play, and this gave a softer feel to proceedings. However, owners countered this with optimism over the first decade November Libyan program and a busier second decade at CPC. As the week progressed though, the actual cargoes worked remained limited and this coupled with the expected Suezmax interference rung the death knell. Ceyhan rates dropped suddenly from WS177.5 to WS167.5 and a Sidi Kerir cargo with a long flat rate even dipped into the WS150s via a Suezmax on part cargo basis. CPC rates stood their ground with owners refusing to move much from WS192.5 given the longer employment and the chances that Black Sea rates move next week. At the close of play many of the Suezmaxes are employed, the north is firmer and TD25 is settling and so the Med looks to flatten out.
US Gulf/Latin America
Freight rates for VLCCs from USG softened this week as activity was not enough to counter the negative impact of failed ships coming back into the market. Charterers have applied more pressure as they see opportunity to cover cargoes at competitive levels, though we will need to see a fresh surge of activity if rates are to recover to meet owners’ expectations. There is a more positive outlook on Brazil exports as a limited number of offers on quoted cargoes this week resulted in some gains for owners. The hope for owners will be that this continues into next week as the position list begins to thin out. Today we expect a USG/China cargo to pay in the region of $8.0m and a Brazil/China run is around the WS61 level.
TD25 took a sharp downward turn this week as prompt ships littered the tonnage list and most deals were done off-market with market calls fueling the downward sentiment. Surrounding sizes also saw a bit of a softening trend as inquiry remains minimal for Q4. We expect most eyes are on Israel’s next steps coupled with the US election in less than two weeks.
North Sea
The North Sea Aframax market has been dogged in recent weeks by owners who need to remain in the area looking to fix off dates without muddying the water too much. Finally, given the absence of many of these players rates were allowed to move upwards. The conference low WS120s were moved first towards WS130 but then with further activity at the end of the week WS140 and WS145 were achieved for natural dates. Indeed, tricky replacements even paid higher again thus galvanising the remaining owners with optimism that the floor for the next months will be much closer to these levels.
Crude Tanker Spot Rates (WS)
Clean Products
East
Another quiet week for the LR2s in the AG, with limited stems entering the market, competition has been high, and charterers have been able to keep rates flat. TC1 dancing around the 75 x WS120 mark and West at $4.1m. The LR1s have been busier on the short haul cargoes as CoA liftings have helped keep pool tonnage moving. However, these units will be back on the list in no time and with the lack of cargoes this flat sentiment continues. We see TC5 at 55 x WS130 with West needing a true test and assessed at $3.4m for now.
A miserable week for the MRs as last week’s action did not continue. Too many fresh ballasters from ECI/Spore/Oz meant the position list on Monday was overwhelmed with good itineraries and not enough cargoes to match. Unfortunately, the poorly performing LRs meant that all westbound, eastbound, and short hauls were eaten up by the bigger sizes, leaving EAFRs as the only viable option to keep ships moving – and there is only so much product Africa can take. TC17 rates have fallen from WS240 last week to WS195 today – with potential for a further fall. Westbound remains untested (last done is $2.2m as $2.45m failed) – but a true test is needed. TC12 has traded down to WS145 but could slip lower again. Hopefully this is a small blip of a week in an otherwise forecasted ‘bullish’ Q4.
Mediterranean
All in all, it’s been a slow week for the Handies here in the Mediterranean and as a result the tonnage list has been able to grow. We began the week with xMed trading at the 30 x WS160 mark but after some sluggish enquiry rates soon dipped to 30 x WS150. Since then, we have seen 30 x WS145 also achieved but feel rates are very much grade dependent. Quiet into the weekend.
Finally, to the Med MR’s where it’s been a tale of two halves. The first half of the week was active with a good influx of enquiries and as a result rates were able to solidify at the 37 x WS105 mark for Med/TA. Since then, however, it has slowed down but with the list still tight at the front-end it is likely we will see rates hold into the weekend.
UK Continent
The MR markets limped into the weekend with one cargo marketed on MRs and yet that is still a short haul. The lack of long-haul weighs on our minds knowing that the resupply will be there for the next window and combined with the TC14 tonnage that’s coming in abundance it doesn’t give much hope for rate improvements going into November. Currently the last TC2 is WS95 but a typical ARA/TA single option could test at WS90 next.
It’s been another good week for ULSD demand for xUKC runs as we have seen these cargoes covered via Handies and MRs as freight has traded around 30 x WS137.5-140 for the majority of it. With long haul cargoes lacking on the MRs, some have continued to fix short haul 30kt clips in order to keep tonnage on the move. With vessels not leaving the region on the bigger sizes expect more of the same to continue on the Handies for the short term here.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
The week got off to an active start with plenty of early cargoes clearing tonnage and quickly boosting sentiment with owners looking to kick levels on. However, activity ran out of steam right as the list tightened and enquiry slowed towards the end of the week with levels sitting around 30 x WS200. Looking to next week we expect levels to stay steady early on.
A disappointing week for owners in the Med as sporadic enquiry caused a slowdown in momentum leaving levels steady at WS 175 for ‘vanilla’ xMed runs, when firming looked possible early in the week. Should activity remain slow early into the week, we think that the balance of power could shift back into charterers’ hands and some points could be up for grabs for charterers.
MR
A fresh test at full stem was seen in the North repeating last done levels at 45 x WS150. More tonnage is on the way early mid first decade of November and we feel that levels could be tested down if charterers can push their dates back slightly.
Another quiet week for owners at full stem in the Med with little by way of enquiry, part cargoes remained the sole source of employment for owners.
Panamax
Reports of a Panamax fixed for a TA voyage stayed under the radar along with the details, leaving case-by-case freight rates remaining with little to work with. In the USG, trading has mostly been sideways all week despite a slight jump in levels from the WS142.5 mark to around WS145 now. With surrounding Afra markets slowly softening, it is to be seen if the Panamaxes can hold their current 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 change | Oct 24th | Oct 17th | Last Month* | FFA Q4 | |
| TD3C VLCC AG-China WS | 1 | 57 | 57 | 54 | 63 |
| TD3C VLCC AG-China TCE $/day | 0 | 35,500 | 35,500 | 33,500 | 37,000 |
| TD20 Suezmax WAF-UKC WS | -2 | 98 | 100 | 73 | 104 |
| TD20 Suezmax WAF-UKC TCE $/day | -1,500 | 37,500 | 39,000 | 23,000 | 37,250 |
| TD25 Aframax USG-UKC WS | -5 | 169 | 174 | 101 | 180 |
| TD25 Aframax USG-UKC TCE $/day | -2,250 | 41,250 | 43,500 | 17,000 | 41,500 |
| TC1 LR2 AG-Japan WS | -5 | 120 | 125 | 148 | |
| TC1 LR2 AG-Japan TCE $/day | -2,250 | 23,000 | 25,250 | 33,750 | |
| TC18 MR USG-Brazil WS | -9 | 174 | 183 | 171 | 214 |
| TC18 MR USG-Brazil TCE $/day | -2,000 | 20,250 | 22,250 | 20,500 | 25,250 |
| TC5 LR1 AG-Japan WS | -9 | 128 | 137 | 170 | 141 |
| TC5 LR1 AG-Japan TCE $/day | -2,750 | 16,000 | 18,750 | 28,000 | 17,250 |
| TC7 MR Singapore-EC Aus WS | -1 | 179 | 180 | 179 | 206 |
| TC7 MR Singapore-EC Aus TCE $/day | -500 | 17,000 | 17,500 | 17,500 | 18,750 |
(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis
Bunker Prices ($/tonne)
| wk on wk change | Oct 24th | Oct 17th | Last Month* | |
| Rotterdam VLSFO | +3 | 540 | 537 | 526 |
| Fujairah VLSFO | +22 | 589 | 567 | 556 |
| Singapore VLSFO | +16 | 603 | 587 | 573 |
| Rotterdam LSMGO | +43 | 677 | 634 | 610 |
