Opening the Floodgates

A few years ago, the VLCC market buzzed with talks of new offshore export terminals capable of fully loading VLCCs which would improve the export economics for US crude to Asia. Back in August 2023 we wrote a report on the topic, but since then interest in the matter has faded, whilst permitting has been plagued by bureaucracy and climate goals. In that report, we commented on several projects including Sea Port Oil Terminal (SPOT), Blue Water Texas, Texas GulfLink (TGL) and Blue Marlin. Given the permitting challenges and lack of regulatory support, some of these projects have stalled. However, with a new administration and a new approach, the odds of one of these terminals making it into service by the end of Trump’s term have increased significantly.

The SPOT terminal, which is to be located offshore Freeport Texas, is being developed by Enterprise Products Partners. It will be connected to the ECHO terminal which has pipeline access to the Permian Basin. The terminal is perhaps best positioned to proceed having attained a deepwater port license, but it has seen its final investment decision (FID) delayed following Chevron’s withdrawal from the project. Enterprise is seeking alternative customers to commit volumes to the terminal, yet at present there is little indication, if and when FID may be taken. Nearby, Blue Water Texas, which is being developed by P66 and Trafigura also appears to be on hold. Very little is being said about the project, which had its draft environmental impact statement revoked by the Environmental Protection Agency (EPA). Again, the terminal would have direct access to the Permian, but it is unclear if the project partners remain committed.

Also nearby is Sentinel Midstream’s TGL project offshore Freeport Texas, adjacent to the planned SPOT terminal. The project looks like a possible frontrunner, having recently attained a Record of Decision Approval (ROD) from MARAD, subject to the approval of a deepwater port permit. Further East, Energy Transfer are currently undergoing a Front-end Engineering and Design (FEED) study and awaiting their deepwater port license from MARAD for a facility offshore Louisiana. In 2023 Energy Transfer signed an agreement with TotalEnergies for offtake, subject to FID being taken.

Whilst all these projects have struggled, either in terms of regulatory approval, government or commercial backing, the odds (at least from a regulatory perspective) appear to now be in their favor. With the Trump Administration advocating for deregulation of the energy sector, including faster permitting, it now seems more likely than ever that at least one terminal will come into service. Indeed, following the ROD for Texas GulfLink, the US transportation secretary commented that “the ROD opens the floodgates for American oil exports”.

So, what would the impact be for the tanker markets? For VLCCs it is undoubtedly bullish and will increase the attractiveness of using VLCCs for US exports where receiving port restrictions are not a factor. For Suezmaxes and Aframaxes it could be bearish given just two of these proposed terminals could (theoretically) handle total US crude exports. Aframaxes in particular have benefitted from both export demand and lightering demand, whilst Suezmaxes have been useful in terms of economies of scale and port restrictions. Rising production may be one way to offset the loss of demand for Suezmaxes and Aframaxes, however, even adding just one terminal could be enough to significantly impact demand for smaller crude tankers. Given that the US currently exports around 4 million b/d, with the total capacity of these terminal projects in the 7-8 million b/d range, it is unlikely that more than two will be built. Yet, even just one has the potential to move the dial in the favour of VLCCs.

USGC crude exports (kbd)

Crude Oil

East

Overall,  it was a positive week for VLCC owners. We witnessed a significant improvement in rates from the AG as enquiry levels surged and suddenly tonnage availability especially for early April began to tighten. However, this momentum appears to slow down as we approach the weekend and rates began to soften as a result.  Charterers also began to consider using older and challenged tonnage to put some pressure on modern ships and this seems to have the desired effect. Today we are calling AG/China WS65 and AG/USG at WS34.

In Suezmax markets we have seen an influx of short haul enquiry this week in the East with what looked like quite a depressing list on Monday really tightening up. There are still keen candidates for West runs so the rates haven’t really moved and stand around the 140 x WS57.5 via C/C mark. AG/East has firmed this week and most of the keen players have been clipped away and we estimate today rates are around 130 x WS115.

In Asia, the Aframax market feels like it ended its bullish run with an Australian-bound voyage achieving a new high at WS140. There are few signs of early April stems as charterers look to weather the storm and work privately, while owners sit and wait for the next enquiry. Tonnage remains tight but with the $/day spread between the TD8 and TD14 narrowing to about $2,000/day, some western players could be enticed to stay and trade within the Indo region, putting a cap on rates. Steady as she goes moving into next week.

West Africa

VLCC sector remained quiet on the surface; nevertheless, owners remained bullish as they saw big improvements in the east combined with some resurgence in USG exports. Another positive has been the decision of some owners to keep ships in the east after uncertainty caused by new tariffs and proposed increased port charges from the US. In addition, potential increases in Saudi exports means that keeping tonnage in the east is an attractive option. Charterers could come under pressure here if we see increased activity next week and today  we are calling Waf/East in the region of w66

Suezmax markets in West Africa have been volatile this week and the early position remains very tight, next week owners will be looking to push above WS100, though there is a good argument for less to be there today. The market for now remains steady in the region.

Mediterranean

Suezmax rates in the Med have remained firm this week and there is a lack of firm itineraries in the East Med. Owners will remain bullish going into next week and there’s a good chance we see WS130 repeated for TD6. Libya cargoes for East have been quiet as of late and today we still feel the $5.7M level is where rates lie but to be tested.

A constant flow of cargoes to fix for Aframaxes throughout the week led to gradual change of conditions. A healthy last decade Libya program was concluded this week and this helped tighten the list considerably, with firm ships in lower supply than usual due to port delays in Genoa and Trieste amongst others. Certain charterers did well to pick the low hanging fruit but those left over with end month cargoes found the cupboard bare. Ceyhan profited from its higher flat rate with WS110 concluded a few times but from Libya WS115 became WS120 for vanilla runs and then WS137.5 was eventually concluded for a cargo with some restrictions. CPC cargoes, though few in numbers, were concluded towards the WS140 level. The market is now in need of further testing to see where rates have settled but owners are optimistic.

US Gulf/Latin America

We finally saw some increased VLCC cargo flow this week and this has helped to start the rate recovery, although not as quick or as high as owners would have hoped. Owners’ sentiment will also be lifted by a shrinking tonnage list, so there is optimism that next week could see more improvement as charterers move to cover the remaining April stems. Brazil exports had one of its quieter weeks in a while but rates showed an improvement, following gains both in WAF and USG. Today we are calling USG/China at $8.2m & Brazil/China at WS63.5.

North Sea

Although the North Sea has been active, rates remain tepid as levels crabwalk at WS107.5. Little change expected, no real push in terms of where we can go. Optimism from the other side of the pond continues, which will pull further into but not enough to change levels in Europe

Crude Tanker Spot Rates (WS)

Clean Products

East

A little bit of room to breathe as the pace drops down a gear towards the latter part of the week for the LRs in the East. Rates across all sizes are holding flat, and although not a huge number of stems open in the market, both lists remain tight of the front end and as such we are seeing charterers looking further forward for available safe tonnage. TC1 at the 75 x WS160-165 levels with UKC at $4.1m. TC5 at 55 x WS175 and UKC at $3.25m. Overall owners will be confident heading into the weekend, and charterers will be thankful for the slight air of calmness the end of the week has brought.

Firm sentiment has continued to grip the MRs east of Suez where both the Red Sea and AG markets have seen rates continue to push on. A steady flow of cargoes up to end month dates combined with a tight list and a firm LR market to get the week off to a positive start for owners pushing positions. We saw 5-10 point increments on vanilla TC17 runs with short haul and East runs also performing well. Despite a quieter end to the week, we close with WS170 TC12, WS270 TC17 and expectation of more of the same come Monday.

UK Continent

An active week for MRs, which has seen owners dig in and push rates up. The list remains tight, and owners remain bullish, with 37 x WS180 the latest paid on UKC/TA. The list is still not replenishing due to massive displacement in favour of the Americas, and owners are eyeing better returns. The real luxury that owners have at the moment is that they can push hard for better rates on the long haul enquiries all week and if they don’t get the number they want then there is a constant stream of 30-37kt short haul cargoes they can take as a time killer. USTR clauses are still causing some issues, next week should clear up what the impact should really be with the meeting penned for the 24th. 

A decent week has passed for Handy owners in the North as there has been a consistent flow of short-haul stems (mainly ULSD) in the market. MRs have had a strong end to the week with 37 x WS190 paid for XUKC which is equivalent to 30 x WS234 which could see Handy freight climb further off the back of larger units. For now, XUKC closes at 30 x WS210-215 and with the weekend break on the horizon a fresh look on Monday to see if a few more units have firmed up.

Med 

The Med MRs have seen a shift in drivers. Having been the better market, with Gibraltar being the logical ballast target for any vessel coming from the Caribs, the North market is now guiding the Med MRs gently up. This combined with a booming Handy market have become the factors that are putting a spring in the owner’s step. Rates are largely following the North up albeit lagging a little, latest paid was 37 x WS185 to WAF so about WS170 TA. The Med is still suffering from a depth of tonnage so the TC14 market and incoming laden vessels are the key factor here, as well as the weather. 

A lethal combination of a ship running late, a flag waiver restriction and some bad weather and the Med has exploded this week. Rates have ramped up significantly with 30 x WS280 levels being done and owners still with energy in the tank to push for more. Cargoes will now for sure hold back a little and the lists will replenish over the weekend a little, but as it stands it is tight and bullish and anything with grade sensitivity or complexities will likely be on the receiving end of some hefty indications.   

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

This week’s trading has seen the North continue to firm as owners capitalise on a tight list to drive levels upward to the 30 x WS200 mark by the close of play Friday. The week started with 30 x WS197.5 put on subs, pushing owners closer to testing the WS200 mark before a cargo midweek saw that barrier broken for a XUKC run. Relets for the most part have gone O/P, keeping owners in the driving seat and keen to push on further when enquiry next surfaces. Looking ahead to next week, we expect replenishment to be light and levels to firm up further here.

A mixed bag overall in the Med. The week started with an eye-catching 30 x WS230 paid for a premium port load, which fuelled positive sentiment for owners. 30 x WS220 soon went on subs for vanilla XMED run, which provided a fresh benchmark on which to build. With a tight list and seemingly a strong start to the week, ideas of freight began to tick up towards the 30 x WS225 mark, however, these levels failed to materialise as enquiry seemingly dried up and momentum shifted from firm to steady. Thursday saw a renewed vigour enter the market, with units clipped away at 30 x WS220, tightening up the list and bringing with it a return to owners’ bullish feeling for the week ahead.

MR

It was not the week MR owners had hoped for, as Handy and part cargoes were the main source of employment. Availability was consistently tight across the North and Mediterranean but full-stem enquiry struggled to surface, leaving guiding ideas at 45 x WS150 levels for the North and 45 x WS155-160 for the Med. Owners in both regions will be hoping that enquiry surfaces early into the week, if they are to take advantage of a favourable list.

Panamax

A largerly flat feel continues for Panamaxes on this side of the Atlantic, as enquiry remains elusive despite options being a-plenty for charterers. Options continue to arrive as TA runs from the USG/Caribs consistently replenish workable tonnage. Levels remain untested but ideas have changed little at around the 55 x WS110 mark. Over in the USG/Caribs, the usual local options have been thinned out somewhat as tonnage heads long-haul, helping to provide the potential for levels to bounce for TD21. As deals continue to conclude under the radar and chip away workable tonnage, we expect levels to begin to tick upwards here.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeMar 20thMar 13thLast Month*FFA Q4
TD3C VLCC AG-China WS1069596560
TD3C VLCC AG-China TCE $/day12,25053,75041,50046,00038,000
TD20 Suezmax WAF-UKC WS-396999287
TD20 Suezmax WAF-UKC TCE $/day-2,25038,50040,75034,50029,750
TD25 Aframax USG-UKC WS14146131146138
TD25 Aframax USG-UKC TCE $/day5,50034,50029,00033,50026,750
TC1 LR2 AG-Japan WS13164152122 
TC1 LR2 AG-Japan TCE $/day3,50041,50038,00025,250
TC18 MR USG-Brazil WS40176136160163
TC18 MR USG-Brazil TCE $/day7,75020,75013,00017,00016,000
TC5 LR1 AG-Japan WS13181168137145
TC5 LR1 AG-Japan TCE $/day3,50032,75029,25019,75020,750
TC7 MR Singapore-EC Aus WS6210204202185
TC7 MR Singapore-EC Aus TCE $/day75024,75024,00022,25019,250

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

Bunker Prices ($/tonne)

wk on wk changeMar 20thMar 13thLast Month*
Rotterdam VLSFO  +1488487536
Fujairah VLSFO  +4509505561
Singapore VLSFO  +0510510568
Rotterdam LSMGO  +17630613672

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