Sailing the Sea of Sanctions

Just before the end of his presidency, the Biden administration gave a parting gift to the tanker markets as the Office of Foreign Assets Control (OFAC) sanctioned 155 mainly Russia affiliated tankers. In the same week, Shandong Port Group, home to refiners responsible for significant crude imports from countries under US embargo, banned sanctioned tankers from calling into its ports in eastern China. The following weeks saw some redirection of trade flows and rising freight rates especially for VLCCs, as buyers of Iranian and Russian crude attempted to diversify their import streams to safeguard supply.

Not long after Donald Trump came to power, he confirmed that the “maximum pressure” policy from his first administration would be reinstated, raising hopes that widespread sanctions and sanctions enforcement on the Iranian oil trade were forthcoming. Yet, after yesterday’s round of sanctions this brings the number of Iranian tankers sanctioned by OFAC since then to 23, and this hope seems to so far have been misplaced. Freight rates which soared in January have shrugged off any further sanctions announcements from the US, UK and EU, and have come back down to earth. This begs the question whether flows have also returned to normal, or whether any lasting impact of this renewed pressure on Iranian and Russian seaborne flows still prevails.

Russian crude imports to India, one of the main importers of Russian crude, initially dropped below its 2024 average by 200kbd in January, and 300kbd in February, which was compensated for by increased imports from West Africa and Latin America. However, imports of Russian crude into India have rebounded so far in March to above average post-Ukraine War levels, possibly supported by prices recently falling below the price cap threshold.

Chinese crude imports seem to have seen a stronger impact, as flows from Iran, Venezuela, and Russia were 800 and 900kbd lower in January and February than the 2024 average, respectively. These numbers need to be taken with a grain of salt, however, as Chinese crude imports from all sources were significantly lower in January, and not all barrels imported in February have been detailed yet. Similarly to India, so far in March imports from Iran, Venezuela, and Russia are back to above 2024 average levels. Run cuts by independent refineries in Shandong may also have contributed to reduced imports, as a change in tax regulations coming into force on January 1st heavily impacted refining margins.

It was reported that the Trump administration was considering an international accord to inspect Iranian oil tankers at sea, though details have been limited. Overall, this could indicate that increased sanctions had a temporary impact on seaborne flows which seem to be normalising again as workarounds have been found. An alternative explanation is that the full effect is yet to be felt. It was reported today that several Chinese state oil companies are halting purchases of Russian oil for March-loading, which would support this thesis. Thus, the effect of sanctions on the utilisation of the dark and sanctioned fleets remains unclear.

India imports of Russian crude (kbd)

Crude Oil

East

VLCCs in the AG enjoyed a busy week as charterers moved to cover their end month programmes. However, freight rates did now show much improvement, and we end the week with levels remaining around last done. The current tonnage list is sufficient for the number of available cargoes so we are unlikely to see much change next week when we wait the arrival of April stems. Today we are calling AG/China WS58 and AG/USG WS32.

Enquiry for Suezmaxes in the East has been steady throughout the week, with enough to keep the list from building too much, though rates are still struggling to break the 140 x WS57.5 via C/C mark. With improved sentiment in the West and some ships being picked off on forward dates for Baltic business, expect improvement next week. For AG/East, Vs are firmer which will help owners to push rates above 130 x WS107.5 next week.

AG Aframaxes are very tight up to early April. As ever, it’s a combination of factors that move markets and it appears there is a window of opportunity for owners. Improved inquiry in both Indo and AG has seen tonnage picked from an already balanced list and big rates are on offer to those willing Premium trade in West. Meanwhile, although Suezmaxes have been trundling along the bottom recently, momentum from CPC and this very tight Aframax list in AG might provide owners some ammunition. The feeling is we will see an uptick across all sizes.

West Africa

Overall, it was a steady week for VLCCs in WAF as activity levels were not sufficient to improve freight levels and the lack of USG activity has impacted negatively on owners’ efforts to push levels upwards. One positive is that the increased levels of activity in AG has meant we are seeing a noticeable drop in the level of eastern ballasters so we could see charterers face increases pressure if cargo flow improves but for now levels seem likely to remain at current steady pace. Today we are calling WAF/East in the region of WS59.5.

Suezmax markets in West Africa have firmed throughout this week, next week owners will be looking to push over WS100. There is potential for some of the pressure to ease over the weekend with more itineraries firming up but for now, the list remains tight, and owners are likely to be feeling very ambitious on the rates.

Mediterranean

CPC is absolutely on fire this week with Suezmax rates rocketing 30 points and cargoes still outstanding. With lots of uncertain itineraries fixed there could be further fireworks next week if there are delays at discharge ports around the Med. Owners will be looking to maintain the WS130 for TD6 fixed off prompt dates and possibly push rates higher. Libya/East runs competing for a similar pool of ships are going to see some improvement, today we feel the $5.8M level is realistic.

Med Aframaxes started the week with the early part of the position being well stocked and rates held in the WS115 region for Ceyhan loaders. During the week charterers from Libya came out of the woodwork and mopped up all the early tonnage, but with plenty of available tonnage the rates stayed flat at WS115 for good flat rates and WS120 for slightly worse flat rates. CPC remains largely untested, due to the heavy Suezmax program. As we finish the week, owners are slightly optimistic, given the list has thinned out, but for the next window there are still ships remaining and only replacement cargoes will help lift the market.

US Gulf/Latin America

It was another difficult week for VLCC owners in the USG as days of limited activity is likely to increase pressure on owners and tonnage starts to build. The uncertainty caused by tariffs is having a negative impact and we are likely to see less enquiry to China in the near term. Brazil export volumes were decent but not enough to push levels much higher as charterers faced limited resistance due to an increase of available tonnage. Today we are calling USG/China $7.3m & Brazil/China WS57.5.

North Sea

The most notable thing to speak of this week in the Aframax North Sea market was the collision off ECUK. Whilst that caused somewhat of a stir the local Aframax market behaved in its standard sloth like manner. WS107.5 remains the number and is still achievable with good tonnage. As always, we’ve seen some ballasters heading both Med and TA unwilling to stomach local returns. Perhaps the US market holds some draw with a waft of optimism, unlikely to attract any but the standard pond hoppers though.

Crude Tanker Spot Rates (WS)

Clean Products

East

A very busy week that has seen the tonnage lists on both sizes really tighten up. The LR2s have been quietly building momentum and with $3.95m on subs for a West bound owners will go into next week with levels starting with 4 in their sights. TC1 natural ships are hard to find on this tight list, as such a Platts deal with a ceiling of 75 x WS160 shows where this market is heading. The LR1s were a little slow to join the party at the beginning of the week, however, they are in full disco fever now. TC5 on subs at 55 x WS170 for an ex dry dock and over 15-year-old ship. For an open spec nap ship owners will be wanting more than 55 x WS180 now. West runs have positively corrected and sit in the $3.2-3.4m levels. Expect Monday to start with gusto as we see the first decade April stems reaching the market.

An active week on the MRs east of Suez which has seen levels gradually rebound despite the cargo list being relatively short. Off market activity has seen the list tighten and we close the week with WS220 on subs TC17 and next done TC12 expected to be in the WS160 level. Sustained activity on the LRs and a firm Asian market will keep sentiment in the AG stable going in to next week.

UK Continent

Charterers have had to navigate this week rather carefully in order not to get caught out by a tight tonnage list with a good number of short haul ULSD stems keeping vessels on the move. This has led to a stable market with a couple of higher rates being achieved here and there. TC2 continues to remain slow with only system barrels keeping that route populated but the real mover here has been the local trade which continues to keep our lists on the thin side. Incoming ballast tonnage has been quickly snaffled away, but what we must be wary of is a potential build-up of tonnage once we move into the early 20s laycan. Ballasters and XUKC vessels are opening up hoping for another active week ahead to keep this sector sideways. 

A decent week volumes wise for Handies in the North with short haul ULSD demand the main driver behind it. Charterers have continued to quote basis 30-37 as the front end of the handy list has got tricker to navigate through. With limited supply available on the front end, TC23 has firmed to 30 x WS195 with another rate push expected if cargo flow remains. Weekend break should enable a few units to firm up and replenish the tonnage list come Monday. Owners are bullish here.

Med 

This week has been a real mixed bag for the Handies down in the Med with rates cargo dependent throughout. We began the week with XMed bouncing around the 30 x WS180-185 mark which is where we have seen rates for most of the week with levels differing depending on dates & load zone. Good enquiry levels this week and the the list tightened up, with a couple tricky stems coming into play yesterday we have seen rates start to jump with 30 x WS200+ achieved twice. Heading into next week there is a prompt cargo still to cover and with bad weather incoming owners will be bullish come Monday. 

Finally, to the Med MR market which after a sluggish start to the week has started to pick up over the last few days. 37 x WS145 was the call for Med/TA on Monday morning and after the first couple days pressure was beginning to build on the back of poor enquiry levels. However, with TC2 pushing up and the emergence of a couple Med Nap stems owners have pushed to close the gap. Med/TA now finds itself at the 37 x WS160 mark with WAF expected to land at 37 x WS180 off the back of this.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

It’s been an active week for North Handies as consistent enquiry has flowed into a tight list firming up levels. Activity has outpaced replenishment throughout the week causing rates to firm up from 30 x WS185 at the start of the week to 30 x WS192.5 by Friday, with little competition from. Looking ahead to next week, owners will hope for replenishment to remain light and enquiry to get off to a fast start if levels are to kick on toward the WS200 mark.

The Med has seen a similar upward trajectory to the North despite first impressions on Monday looking as though it could be a tough week for owners following last week’s softening of levels. An unusually active Monday trimmed most prompt tonnage from the list before consistent enquiry flowed, firming rates. Rates topped out at 30 x WS220 for a load at a premium port and enquiry slowed down taking the wind out of owners’ sails somewhat. Despite this vanilla XMed ideas sit around 30 x WS215-220 as we close out the week, mainly due to a scarcity of well-approved and modern tonnage.

MR

A relatively quiet week for owners across both NWE and the Med in terms of full-stem enquiry. Handy stems and part cargo opportunities have been the main source of employment in both sectors. Well-publicised tests are required but with tonnage thin we expect levels to be around 45 x WS140 in the North and around 45 x WS145 in the Med as we head into next week.

Panamax

Panamaxes are readily available in the UKC following a spate of long-haul voyages from the USG, though enquiry for a return journey struggles to surface. Ideas here still sit at 55 x WS110-115 but it’s been so long since enquiry emerged that these ideas are more of an estimate, leaving a fresh test required to benchmark against. In the USG/Caribs, the recent rally in levels has lost steam and levels slowly begin to trend downward despite more than usual amounts of tonnage left over in the UKC and Med.

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 13thMar 6thLast Month*FFA Q4
TD3C VLCC AG-China WS159576560
TD3C VLCC AG-China TCE $/day2,25041,50039,25046,00037,500
TD20 Suezmax WAF-UKC WS1199889286
TD20 Suezmax WAF-UKC TCE $/day7,00040,75033,75034,50029,750
TD25 Aframax USG-UKC WS-13131144146137
TD25 Aframax USG-UKC TCE $/day-5,00029,00034,00033,50026,500
TC1 LR2 AG-Japan WS22152130122 
TC1 LR2 AG-Japan TCE $/day8,00038,00030,00025,250
TC18 MR USG-Brazil WS-2136138160168
TC18 MR USG-Brazil TCE $/day013,00013,00017,00016,750
TC5 LR1 AG-Japan WS33168135137142
TC5 LR1 AG-Japan TCE $/day8,75029,25020,50019,75020,250
TC7 MR Singapore-EC Aus WS5204199202181
TC7 MR Singapore-EC Aus TCE $/day1,25024,00022,75022,25018,750

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

Bunker Prices ($/tonne)

wk on wk changeMar 13thMar 6thLast Month*
Rotterdam VLSFO  -4487491536
Fujairah VLSFO  +5505500561
Singapore VLSFO  +10510500568
Rotterdam LSMGO  -10613623672

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