Seasonal Slowdown

With most tanker markets currently seeing earnings at their lowest levels this year, the recent stock market chaos, ongoing energy transition and geopolitical risk, many are asking whether this simply represents a seasonal slowdown, or something more systemic.

In the crude market, earnings are typically weakest in Q3, generally in line with current trends as weather factors (among other drivers) tend to reduce volatility. This year, OPEC+ cuts and weak Chinese demand also seem to be constraining the markets, whilst US crude exports have also slowed and are currently flat year on year.

Crude tonne miles have struggled this year despite the Red Sea crisis. VLCC and Suezmax tonne miles are up 1% and for Aframaxes they are down 1% as the markets have adapted remarkably well to the effective closure of a major chokepoint. VLCC earnings are broadly in line with the same period a year ago, whilst Aframax and Suezmax earnings are higher than they were in August 2023 for the month to date. All of these markets rallied strongly from Q3 lows to Q4 highs in 2023, a trend we expect to see repeated this year. Crude exports from the US should see upside as Q4 maintenance comes into play, whilst Asian refiners will start procuring crudes for post turnaround supplies. Total demand levels remain a concern with consumption in China uncertain; however, even with slower growth, the outlook for the sector remains healthy, indicating that the current weakness is likely primarily driven by seasonal trends.

For the clean products market, the puzzle is more complex and the seasonality is more region specific compared to crude. Tonne miles have so far been phenomenal. For LR2s, they are up 24% year on year, whilst for LR1s and MRs tonne miles have grown a healthy 4% and 5% respectively. Yet much of that growth has been front loaded, with tonne miles trending down in recent months. In the Middle East, Q3 is traditionally the strongest quarter as Middle East refineries ramp up throughputs; however, this year the opposite trend has been observed despite robust volumes. In part, freight weakness has been driven by competition from crude carriers switching into the CPP markets, with 25-28% of all CPP heading from the Middle East/WCI into Europe being carried by VLCCs and Suezmaxes in June/July. Weaker Far Eastern exports in recent months are also another factor; however, trading reports suggest that Chinese exports may rally later this year, with larger export quotas potentially being issued. Looking forward, the market will remain volatile, but could face headwinds until later in Q4 when seasonal maintenance has passed. Involvement of VLCCs and Suezmaxes in clean trades during the traditionally strong Q4 period is also less likely, but could be a factor in 2025 as newbuilding deliveries accelerate.

In the Atlantic, MR earnings remain healthy from a historical standpoint, but below the levels many have become accustomed to. Further upside could be seen for European MRs, if the anticipated active Hurricane season damages US infrastructure. In the Mediterranean Handy market, the earnings weakness might seem extreme, but again is consistent with typical seasonal trends. Here, earnings are expected to improve substantially as we move later into Q4. Heading into next year, however, the dynamics could be different. European and US energy demand continues to transition, whilst US and European refiners are threatened by the new Dangote and Olmeca refineries.

Whilst the market fundamentals are changing, with slower oil demand growth, heightened macroeconomic and geopolitical risk the market outlook remains robust, helped by structural changes in tanker flows and the rapid ageing of the tanker fleet, constraining supply for mainstream players.  Overall, the current weakness is mostly attributable to seasonality, with all markets expected to improve as the year progresses.

Suezmax WAF-UKC Seasonality ($/day)*

*Q4-24 based on current FFA curve (non-eco, non scrubber)

Crude Oil

East

The week started with a flurry of market quotes for VLCCs which were received with mixed feelings. All of them achieved slightly less than last done and attracted approximately six offers. As we moved through the week the pace of activity proceeded at a snail’s pace which left a positive thought in mind for what’s to come. It seems the market has once again found the bottom levels with one fixture concluding at steady levels, and looking into next week the feeling is that a lot of fixtures will be concluded off market. Today we are calling 270 AG/China at WS46 and 280 AG/USG at WS33 level.

Suezmaxes in the AG remain very sluggish with little movement in rates. TD23 we assess at 140,000mt x WS52.5 via C/C. To head East the picture is equally bleak with pressure from VLCCs and rates stand around WS95.

West Africa

The WAF VLCC market has not been inspiring this week, however, fixtures have been reported through off market fixing and levers remain in a vulnerable position. Looking forward to next week the tonnage list on paper looks healthy, and the surrounding regions are begging to improve, so a fresh test is very much needed for a TD15 run. On today’s market we estimate that the current rate for WAF/China should be around WS52 level.

Suezmax markets in West Africa remain steady with prompt tonnage still available, rates are around 130,000mt x WS77.5 but there is a feeling that things may have bottomed here and some Owners are feeling ambitious.

Mediterranean

To the Suezmaxes where TD6 is steady, and there is a slightly better level of enquiry after maintenance and rates are approximately 135,000mt x WS90. Rates to head East remain unexciting and continue to hover at $4.5M for Libya/Ningbo via C/C.

Coming into the week Aframax Owners in the Mediterranean were spooked by the Suezmaxes coming into play, taking out part cargos. This was then further compounded by news of a proportion of the Libyan program going offline with Zawia having politically motivated issues. Given this it did not take long for Charterers to undo gains made last week with Ceyhan trading back down to the low 130s and CPC going for a weekly low of 140. Looking ahead there is no reason to expect a rebound with surrounding markets and sizes remaining weak.

US Gulf/Latin America

VLCCs in the Atlantic basin sat below expectations this week, and a handful of cargoes floated into the market. However, the results were not as positive as some would hope. There have been a few fixings and failings but as it stands there is nothing to get excited about. The Brazil export market has also been quiet on the surface and those looking to cover have struggled to attract a decent amount of offers, leaving levels to improve a touch. It will be interesting to see how next week pans out. We expect a USG/China run will fix in the region of $6.8m while we estimate a Brazil/China run is paying around WS51 level.

North Sea

Another week for Aframaxes that can seemlessly merge with the rest as we go deep into the summer with about as much volatility as a broken yo-yo. The prompt end is getting even longer with people starting to question if WS120 can be broken with all surrounding markets also looking weak.

Crude Tanker Spot Rates (WS)

Clean Products

East

The lack of stems seen on the open market continues to plague the LR1s with yet another week where negative corrections have been seen. As the LR1s tonnage continues to build with vengeance, rates will continue to slide south. Next TC5 should be 55 x WS130 (or less) and UKC needs a fresh test but we asses it in the $3.4m region. Different story for the LR2s where we have started to see more activity (heading into the weekend with 4 open cargoes). $4.0m for a Sikka/West on 90kt Jet would place AG/UKC at $4.2m and TC1 on subs at 75 x WS137.5 is a good footing to be able move forward from here. Hopefully some of this action will trickle into the LR1 market come next week.

MRs in the AG continue to come under pressure despite cargo flows being maintained at a more regular pace. Eastbound TC12 has been corrected down to WS152.5 and the mid 140’s with TC17 largely staying in the 200-205 range. Westbound has been nudged down again closer to $2.2m and a handful of ex AG stems have seen prompter stems clipped away. Not all subs are being lifted for one reason or another, however, and with relets keeping the list well balanced, Owners looking to fix in the natural window are having any aspirations of pushing up rates stalled for now.  

Mediterranean

All in all, it’s been a lacklustre week for the Handies here in the Mediterranean with rates tumbling throughout. We began the week with Xmed trading at the 30 x WS155 mark but with the list well-supplied rates were soon in free fall. We now see Xmed at 30 x WS120 which has been repeated a handful of times and is seemingly now the bottom. Quiet into the weekend. 

Finally to the Med MR’s which have seen good activity this week but due to pressure on TC2 and a healthy list rates have come under pressure. 37 x WS170 was the call for Med/TA on Monday morning with WAF tracking at a 20-point premium but fresh lists showed plenty of options for Charterers. This combined with a weakening TC2 market saw rates slip and we now see Med/TA trading at the 37 x WS157.5 mark. Rates are under pressure as we approach the weekend.

UK Continent 

A week to forget for the MR Owner fraternity as with most sectors across Europe we see a lack of enquiry and a glut of tonnage really kill any hope of holding onto last done rates. The week started at the dizzying heights of 37 x WS200 for TC2 but as the summertime vibes really took a grip we see nearly 50 points wiped away and with plenty of laden tonnage still heading this way, it’s hard to see where this negative momentum will stop. 

With the summer markets also in full swing for Handies in the North it has been a bad week for Owners. Enquiry has been drip-fed into the market and with a healthy amount of units for charterers to pick and choose from, xUKC has dropped down to 30 x WS150. It feels like Owners are not out of the woods yet for the short term and fearful that the bottom of the market has yet to be reached.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The North saw another quiet week and despite a positive start overall sluggish enquiry continued. Naturally positioned units remained tight and levels firmed to WS235 for an xUKC voyage fueling owners’ bullish ideas. Despite an under-the-radar deal at 30 x WS205 for a UKC-Med run on an otherwise perfectly fine vessel, next-up and well-vetted tonnage managed to push levels with WS240 reported on subs come Friday. As we look to next week, next done will be a big test and bring clarity to where the market truly lies.

In the Med the week got off to a slow start, however, enquiry chipped away at the top of the list as the week went on before a flurry of activity trimmed the fat from what was beginning to look like a lengthy list. Sentiment was left steadier to close out the week’s trading. Looking ahead to next week, if this steady feel is to continue, enquiry will need to get off to a fast start.

MR

MRs have seen a quiet week overall with lacklustre full-stem activity across the North and Med, leaving owners to find employment via part cargoes. Tonnage is tight in the North with Owners’ ideas of rates at the WS175-180 mark, however, options begin to open for Charterers early/mid-second decade where perhaps levels could be tested down. In the Med, the feeling is levels have topped out at 45 x WS185 for an xMed voyage with softening expected upon next done due to availability for Charterers.

Panamax

Another quiet week for Panamaxes across the North and Med with just the one fixture to report at 55 x WS125 for an ARA-USG/Caribs run. This has brought with it a fresh test and a benchmark to work on. Workable tonnage is mainly owned by just a few Owners who are unlikely to trade against themselves keeping levels steady here for now. In the Caribs/USG surrounding markets have caused levels to soften substantially, however, for now the heavy bleeding has stopped but levels here are yet to find a floor.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeAug 8thAug 1stLast Month*FFA Q3
TD3C VLCC AG-China WS-245474750
TD3C VLCC AG-China TCE $/day-1,00021,50022,50021,00021,250
TD20 Suezmax WAF-UKC WS-377809987
TD20 Suezmax WAF-UKC TCE $/day-1,25024,75026,00036,75027,000
TD25 Aframax USG-UKC WS-4124128183148
TD25 Aframax USG-UKC TCE $/day-50025,00025,50045,25029,750
TC1 LR2 AG-Japan WS-16135151173 
TC1 LR2 AG-Japan TCE $/day-5,00028,75033,75041,250
TC18 MR USG-Brazil WS-8220228226229
TC18 MR USG-Brazil TCE $/day-1,25028,75030,00039,75027,500
TC5 LR1 AG-Japan WS-17138155216163
TC5 LR1 AG-Japan TCE $/day-4,00019,00023,00038,50023,000
TC7 MR Singapore-EC Aus WS-3188191267226
TC7 MR Singapore-EC Aus TCE $/day-25018,75019,00032,50022,750

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

Bunker Prices ($/tonne)

wk on wk changeAug 8thAug 1stLast Month*
Rotterdam VLSFO  -27533560586
Fujairah VLSFO  -14576590623
Singapore VLSFO  -20591611622
Rotterdam LSMGO  -39664703734

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