Price Pressure

With all the turmoil in the global financial markets, oil prices have come under pressure not seen since the pandemic. Prices began their heavy slide last week and fell 18% to a four-year low, before recovering to $64/bbl, as Trump paused his reciprocal tariffs (except China) for 90 days. US trade policy was of course the primary driver, but perhaps most surprising of all, was the timing of OPEC+’s decision to accelerate production increases at a time when the demand outlook is turning increasingly bearish. Prices are likely to remain volatile as markets react to ever changing US trade policy, but for now remain significantly off where they began the year.

So, what might the implications of lower prices be? Firstly, it depends on how long prices stay low. Trump’s decision to pause reciprocal tariffs for 90 days may have helped prices find a floor for now, but with an escalating trade war against China, and 10% worldwide tariffs still in place, downside risk remains. Even with the latest pause (ironically) US production is most at risk from lower prices. Data from the Federal Bank of Dallas showed that US shale producers operating in the major Permian and Eagle Ford regions required around $61-62/bbl to be incentivized to drill new wells. As such, as older wells mature and enter decline, new wells may not be drilled to sustain production. The observed oil rig count fell by 9 week on week, the strongest decline since June 2023.

OPEC+ may also be forced to re-evaluate its production increases. Whilst the group is generally better placed to weather lower prices than US producers, most still require a high oil price to balance national budgets. As such, the group may not be willing to put oil prices under excessive pressure for a prolonged period. Lower prices can however stimulate demand. Major crude importers like China might be incentivized to build both commercial and strategic petroleum reserves (SPR) whilst prices are low, which in the near term could boost seaborne trade volumes. Lower prices could also offer an opportunity for Trump to fulfil his pledge to fill the SPR “right to the top” and give him scope to put further pressure on Iran and Venezuela. However, filling the US SPR would likely be negative for tanker demand, assuming domestic grades are used. Lower prices could also encourage consumers to boost oil consumption, although with a weaker economic outlook, the impact is likely to be countered by weaker industrial demand, job losses and reduced consumer spending.

Contango could also become a factor. Oil supply and demand balances have been pointing to an oversupplied market in 2025 for some time. Now, with demand facing significant headwinds, the odds of contango emerging have increased, even if not to the scale seen in 2020. Any hit to consumption would likely be slower and shallower than the pandemic and whether a contango would be steep enough to incentivize storing at sea remains to be seen. With global onshore oil inventories well below the five-year average, these inventories would likely fill first before floating storage becomes viable.

Lower prices will also reduce the barriers to trading with Russia. ESPO crude prices fell below the G7 price cap for the first time ever this week, which could allow Western shipowners/service providers to engage in Russian Far East crude exports, potentially sidelining some dark fleet vessels which have dominated the trade. Initial reports suggest that freight costs for dark fleet voyages on the Kozmino-North China route are already under pressure as a result.

Refining margins, which have remained relatively steady over the past week, could also face pressure if faced with weakened demand, prompting run cuts and perhaps even accelerating the closure of some older facilities for good.

For now, the physical market appears relatively unscathed, but for every week tariffs remain a threat, the demand outlook becomes increasingly bearish. The downside for tankers may not be immediate and could be punctuated by periods of high (and low) volatility as imbalances in supply and demand play out. If oil producers fail to adapt quickly enough to the changing demand landscape, then the upside volatility for tankers could be even greater. As is often said, the cure for low oil prices is low oil prices.

Brent Oil Price ($/bbl)

Crude Oil

East

The AG VLCC market is facing some challenges with this week’s downturn in rates. The lack of activity and an expanding tonnage list are certainly contributing factors. We can expect more market volatility, as April stems are not yet all covered. The anticipation of May stems being released next week could potentially shift the current sentiment and owners hope for increased demand to stabilize or improve rates. It will be interesting to see how the market reacts in the early part of next week and today we are calling AG/China WS53 and AG/USG WS29.5.

On a Suezmax Basrah/West is looking firmer this week, charterers have managed to get away around the WS55 level just about. Though with a busy Friday for short-haul business and a lack of prompt ships expect Owners to be pushing for 140 x WS60 via C/C. Rates to head East are firmer again with few firm positions to work with though with VLCCs likely to jump in on the action owners will struggle to move rates over 130 x WS110.

Another quiet week in the AG region has led to a slow descent in rates on Aframaxes with TD8 slipping below WS150. However, owners are having more joy in the Med market which has sprung to life. Owners in the Red Sea will now look to jump back West and any owners able to transit will use the Med market as leverage on any East cargoes. In Asia, Aframax indices improved to reflect market levels. The TD14 prints 80 x WS135, a marginal increase from the start of the week. Chartering activity picked up for final decade requirements but the tonnage list appears relatively balanced. The market anticipates more stems to emerge and expect owners to test new levels for the region should momentum swing in their favor.

West Africa

The VLCC market here is experiencing an uptick in activity which is a positive sign after a period of stagnation. However, the lack of significant improvement in freight rates indicates that the market is still very cautious and may be influenced by various factors, such as the failing of reported ships on subs and increases in available tonnage. The fact that the levels are stronger than in adjacent markets suggests some resilience, but the situation remains precarious. We are calling WAF/East in the region of WS59 today.

Suezmax markets in West Africa are still rather steady. With VLCCs starting to come into play, once they are soaked up, we could see further improvement. You may just about be able to chip below for the right run, but owners will be asking for WS105 for TD20 today.

Mediterranean

On Suezmaxes, TD6 has fallen away slightly this week to WS125, though the list in the Med is still tight and don’t be surprised if we see the market rebound quite quickly next week. For Libya/Ningbo rates today are around $5.7M, though with some players keen, so charterers are likely to be able to chip below.

A fifty-point swing covers the spread between highs and lows of what was concluded on Aframaxes this week, but simply looking at this on paper does not reflect what’s been an incredibly interesting period of trading.  Monday opening, and despite CPC coming back online for the surrounding Suezmaxes, owners appeared to have a mini confidence crisis with rates correcting down to WS150.  Although this was ultimately proven short lived with a few deals hovering around this mark, the fact we reached that point was a tad perplexing given the underlying fundamentals. Given the healthy program Libya had projected, and given the approaching disruption of the Easter Holidays, those owners who ultimately decided not to jump in made the right call. As the list gradually shortened, the gradient of positive correction became steeper but looking into next week where we have now reached that ceiling point where Suezmaxes start to make sense of Aframax cargoes it’s hard to envisage similar gains unless this ceiling is raised.

US Gulf/Latin America

This weeks’ developments for VLCCs in USG exports highlighted a significant shift, with fixture levels dropping below previous benchmarks. This decline came after days of limited activity, raising concerns amongst owners who are seeing more ballasters enter the fray. Brazil exports also experienced a slowdown, resulting in softer rates by the end of the week. Next week could prove to be a challenging one as adjacent markets are also struggling to maintain previous levels and today, we are calling USG/China $8.25m & Brazil/China WS57.

North Sea

Now as ever enviously Aframax owners here are looking over their neighbour’s fence watching the rollercoaster unfold as they must contend with the ride on the lawnmower for entertainment. When there was a chance to push it felt like the revs came off just a little bit and we slipped back into neutral instead of seizing an opportunity to make gains. So, as we go into the week before the Easter break rates remain in the mid WS130s, those keen for TA have either taken some chances to get their bunkers paid for, or as ever simply ballasted. With the Med looking fruitful we can see many turning their bows southerly to try and capitalise on lucrative business and a tight list whilst it lasts.

Crude Tanker Spot Rates (WS)

Clean Products

East

Quiet week on the LRs. Fixing has been uneventful and as a result charterers have been able to apply pressure and bring down levels.  TC1 seeing a correction to 75 x WS130 and UKC at $3.75m levels.  Similar situation for the LR1s where TC5 now sits at 55 x WS140 and West at $2.9m. Owners will be hoping for a pre-Easter rush, but currently that’s looking like a tall order.

UK Continent

A tough week for MR Owners plying their trade in the UKC has passed with limited enquiry and a few softer targets pulling rates south. 37 x WS160 where the week started for TC2 seems a distant memory now with a light dusting of TA stems quoted, very few XUKC due to Handies being more competitive, and likewise we saw a lack of WAF enquiry as the larger LR2s dealt with those. This has left the opportunity for charterers to take the upper hand again and come Friday we stumble down to 37 x WS125 now for TA. With little outstanding and a reasonably well stocked list, we don’t anticipate this market to improve a great deal, although the only small light we see being the Med market, which should drag any ballast tonnage in that direction.  

It has been a good end to the week for Handy owners in the North as continued demand has resulted in the front end of the tonnage list tightening. Latest XUKC (TC23) is 30 x WS155 which has been paid a couple of times now. With the MRs softening and little long-haul demand expect MRs to act as a cap to stop handy freight running away as those bigger ships now look for short haul 30kt clips time killers.

Med 

Unlike their continental cousins, this MR Med sector has managed to jump on the bandwagon of the tougher Handy market and with certain grades needing coverage, a few owners have been able to capitalise. Owners have been able to dig in and hold rates relatively flat throughout with 37 x WS155-165 being the go-to rate for TA, but as mentioned before the real kicker of this market has been the short XMed stems giving owners some choice. All eyes on how this Handy market holds out as for now this is the main driver and expect any ballasters heading towards Europe to set their AIS to Gibraltar. 

A stark contrast to where we finished last week regarding Handies in the Med, a well-stocked tonnage list faced an improved cargo quantity which in turn has seen rates rise 40 points from WS165 with WS205 being the latest on subs and the prospect of firming becoming all but definite. There was hesitancy mid-week with rates fluctuating at WS180 levels with other sectors stuttering, however owners remained bullish as is evident and held out to capitalise on fixtures, especially with some trickier cargo grades quoted. With 5 outstanding cargoes and 15 ships still on subs there is plenty of room for further progress although we must wait to see what gets lifted to make a true call of what lies ahead.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The North has gone from strength to strength in recent weeks and this week has mirrored that trend as levels continue to firm albeit in a gentler manner. The week started with limited availability at the top of the list which was soon clipped away. Levels began the week at WS240 before relets were fixed for O/P thinning the list further and paving the way for levels to firm up with 30 x WS245 covered by week’s end. Looking ahead to next week, we expect to see more of the same here with light replenishment and steady cargo flow causing levels to firm further.

It’s been a similar story for the Med which has seen overall more activity but a steady firming in rates from 30 x WS 222.5 at weeks open to repetition of WS225 by weeks close. Enquiry has steadily flowed clipping units from the list and keeping the list trim until owners managed to gain an extra 2.5 points. Looking ahead to next week’s trading, we expect workable tonnage to be available toward the top of the list early on, but should activity get off to a fast start, we expect it won’t take much before the scales tip in owner’s balance.

MR

An overall quiet week for MR owners in the North and Med in terms of full stem activity as again, the usual form of employment was found in part cargoes. The little activity we did see was in the Med where the equivalent of 45 x WS155 was repeated. Tonnage here has skewed WMed all week and should enquiry surface EMed early into next week – we expect owners to kick on rates toward the 45 x WS170 mark. In the North, naturally positioned units have remained thin with local Panamaxes getting into the mix and stealing away some XUKC MR stems. Additional units are expected to arrive from WMed around the start of the third decade, until then, owners’ ideas sit between 45 x WS165-170 for next done.

Panamax

Panamaxes have seen an active week with activity clearing tonnage both stateside and in Europe. A mixture of local, TA and stateside enquiry has been on order this week for tonnage in Europe finally taking advantage of the numerous vessels ending up here. Levels for UKC-USG still sit between the 55 x WS110-115 mark and deals are still concluded on essentially a case-by-case basis. But with more tonnage arriving from the states, owners will be hoping for more of the same here. Over in the USG and Caribs, TD21 has experienced a surge this week with levels firming up some 25 points to WS203.75 by COB London before gaining another 13 points by week’s end, mainly due to consistent under-the-radar activity and a noted amount of vessels heading to Europe.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeApr 10thApr 3rdLast Month*FFA Q2
TD3C VLCC AG-China WS-354575957
TD3C VLCC AG-China TCE $/day-50037,50038,00041,50037,000
TD20 Suezmax WAF-UKC WS10105959990
TD20 Suezmax WAF-UKC TCE $/day9,50046,75037,25040,75035,000
TD25 Aframax USG-UKC WS5190185131151
TD25 Aframax USG-UKC TCE $/day4,25053,00048,75029,00034,250
TC1 LR2 AG-Japan WS-22130152152 
TC1 LR2 AG-Japan TCE $/day-5,75030,50036,25038,000
TC18 MR USG-Brazil WS-43156199136176
TC18 MR USG-Brazil TCE $/day-6,75018,25025,00013,00020,000
TC5 LR1 AG-Japan WS-11140151168129
TC5 LR1 AG-Japan TCE $/day-1,25022,75024,00029,25018,000
TC7 MR Singapore-EC Aus WS-5177182204178
TC7 MR Singapore-EC Aus TCE $/day50019,75019,25024,00019,000

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

Bunker Prices ($/tonne)

wk on wk changeApr 10thApr 3rdLast Month*
Rotterdam VLSFO  -56434490487
Fujairah VLSFO  -54470524505
Singapore VLSFO  -48479527510
Rotterdam LSMGO  -52588640613

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