Table of Contents
South American Supply
South America has been a major source of oil supply for decades. Traditional producers Colombia, Venezuela and Ecuador have all faced challenges in recent years, with Brazil and now Guyana being the leading sources of growth over the past decade. Argentina is set to join the VLCC exporters club, whilst Suriname aspires to replicate Guyana’s success story. On the refining side, however, the region has struggled to make any meaningful progress in recent years. South America is also a major producer of biofuel feedstocks and could increasingly use its agricultural prowess to meet future domestic fuel demand. Geopolitical forces also shape the region’s oil trade. Venezuela remains under sanctions, while Russia has increased its share in the continent’s oil market to the detriment of US refiners. So, what does all this mean for tankers?
Demand growth has been rocky. Prior to the pandemic, the economy struggled. Brazil’s GDP contracted during 2014-16, whilst Argentina has spent 6 out of the last 10 years in recession and also experienced hyperinflation. Venezuela has continued to decline under the weight of sanctions and authoritarian rule. By contrast, Guyana is in the midst of an oil-funded transformation but is too small to make any meaningful contribution to demand growth.
All of this combined means that despite the size of the continent, demand growth is likely to remain slow and steady in the years ahead. Aside from the pandemic, growth has typically been around 100kbd/year and is forecast to increase by just 400kbd by 2030 vs. 2024 levels. Little progress is being made in expanding refining capacity, which despite the limited growth in oil consumption, is modestly positive for the product tanker market. However, domestically produced biofuels and blending mandates will limit the gains in hydrocarbon imports. It also remains to be seen whether Russia will continue to grow its market share in the region to the expense of US refiners, who from next year may need to divert barrels away from Mexico as the Olmeca refinery ramps up.
Crude tankers are set to be the primary beneficiaries. Oil supply is forecast to grow by 1.3mbd by the end of the decade, with almost all of this growth heading for export given that refining throughput will grow by just 100kbd over the same period. Argentina plans to be begin VLCC exports by 2026, whilst Brazil and Guyana grow to the end of the decade, subject to additional upstream investment. Further upside potential could be seen if Venezuela is able to emerge from sanctions and reintegrate into the mainstream oil markets. Overall, the region remains a driver of tanker demand largely due to its export potential, with crude tankers likely to benefit to a greater extent than clean tankers.
South American Crude Production (kbd)
Crude Oil
East
We are witnessing the first green shoots of recovery in the AG VLCC market after the recent downturn which took rates to yearly lows. Owners showed heavy resistance after a slow start to the week and some market quoted cargoes received less offers than anticipated as rates bottomed. The second half of this week has witnessed a steady climb, some caused by increased levels of activity for last decade and some by improvement in sentiment after some positive forecasts by market analysts. In today’s market we are calling AG/China at WS50 or higher and 280 Ag to USG fetches WS33 via C/C.
The AG list remains healthily stocked with tonnage willing all directions, with just hopes that the typhoon could cause some disruption to improve the rates in the next window. TD23 we assess at 140,000mt x WS52.5 via C/C and rates remain relatively stable. For East runs, Owners will be pushing to achieve 130,000mt x WS97.5.
Aframaxes have been sluggish this week. However, the list is looking thinner off the back of a busy previous week and with that rates have stabilized for AG/East at around 80 x WS145.
West Africa
At long last we can say this sector has sprung into life as a plethora of ships reportedfixed of last decade September with many going in an eastbound direction afterthe recent lull. This pick-up in activity is starting to show as rates haveseen a small uptick and with more positive outlook in AG it could be the startof a much needed renaissance in the Atlantic. Today we expect 260 WAF/China tofix in the region of WS52.5 level.
Suezmax markets in West Africa remain rather soft, but with a better level of activity to end the week the list has started to thin out a little. Despite this, with tonnage available on the water and a weak USG market, we feel the rate today for TD20 should be 130,000mt x WS77.5.
Mediterranean
TD6 rates remain soft around 135,000mt x WS80 with a number of prompt vessels to keep the pressure on Owners and allow Charterers to ask for lower than usual AWRP caps. Rates to head East remain relatively stable at $4.6M for Libya/Ningbo via C/C, with Owners resisting and not quite being willing to throw in the towel for the market in the West.
It has been an interesting week for Med Aframaxes. Facing falling export demand from Libya, the market corrected down to a floor of WS100 Crossmed. Charterers did briefly attempt to break the physiological WS100 barrier but were ultimately unsuccessful. This new low did create collective activity through the balance of the week though, encouraging higher than expected fixture activity. This has brought a turnaround to front end availability going into next week. Although levels have not yet reacted to the recent clear out, Owners find themselves on a slightly firmer footing. All eyes remain on Libya as the catalyst.
US Gulf/Latin America
Mixed signals here especially from USG as rates continued to soften against low levels of demand but towards the end of the week there were signs of an improvement as Charterers started to cover mid-October stems and Owners starting to push back after seeing the improvements in adjacent zones. Brazil export had a quiet week with rates generally on the softer side but both areas can expect to see some improvement as its expected to get busier. Today we expect a USG/China cargo to pay in the region of $7.2m and a Brazil/China run is around WS50 level.
North Sea
As usual, interest in the North Sea Aframax market has been limited and Owners have done their best to cling on to last done levels of WS120. In the main, this has been achieved and early ships which have missed dates have been forced to ballast to the States in the hope of better. Unfortunately some Owners have seen their available fleet steadily grow and by friday, the pressure was too much. A new low of recent times at WS115 was concluded and other Charterers will look to this new benchmark as we begin the next week.
Crude Tanker Spot Rates (WS)
Clean Products
East
Flat is the word of the week for the LR2s in the East, as rates haven’t really seen a huge amount of excitement. Owners will be hoping that the number of ships on subs should mean that as more stems appear next week they will be well positioned to move forward. For now, TC1 sits at 75 x WS117.5 and West via C/C at the $4.0m mark. Similar story for the LR1s, decent levels of activity over the course of the week, but overall rates haven’t really seen any progression, except for the West runs. A real lack of interest from Owners for jet west has seen this run really pushed and with $3.55m on subs for jet west, it really shows how hard it is to cover these runs currently. TC5 has stayed flat at 55 x WS140. A healthy list of outstanding cargoes remains and with a little more enquiry it could pick up.
MRs in the AG continue to come under pressure and the summer market is yet to show any signs of easing off. TC17 saw a drop to WS195 by mid-week with repetition at this level inevitable given very little change in the list. TC12 has also seen a drop to WS130 with the region’s soft sentiment overriding any shortfall in suitable tonnage. Westbound is yet to be tested since but with a lack of appetite for this run from most Owners the expectation is that close to last done will hold. Some green shoots have been seen where the LR’s saw an uptick in movement but how long this will take to trickle down remains to be seen.
Mediterranean
A hard week to mention much positivity for these Handies in the Med as this market continues to remain in the doldrums of 30 x WS115 which has been repeated throughout the week and hard makes to see where any change is to occur in the short run given regional refinery maintenance.
Similarly on the MRs we see the summer markets continue with 37 x WS120 the going rate throughout the week and the standard 20 points for Waf repeated. With TC2 looking flat also it seems unlikely rates are to move any time soon.
UK Continent
A week where TC2 once again struggles to get going with rates floundering around the 37 x WS120 region throughout. The lack of Waf enquiry continues but with rates so low we do see a fair few ships being clipped away on the downlow, keeping sentiment subdued. Reports of Dangote supplying gasoline to the domestic market add a further bearish tone. A fresh look at the tonnage list next week may look well stocked but once you remove the premium players, we do see a glimmer of potential as long as the enquiry continues to flow.
We see a similar fate here on the Handies also with the majority of the week bouncing around the 30 x WS155 mark. Reasonable flow on stems has been seen though and come the end of the week we see a potential for Owners to press with fresh enquiry so don’t be surprised to see an uptick on next done.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
The north suffered another quiet week basis 30kt as enquiry was lacklustre leaving natural prompt units at the top of the list for the first time in a while, however, well-approved modern units remain thin. The little activity that did occur was mainly for UKC-Med runs that saw one deal at 30 x WS220 which this is likely unrepeatable. Next up Owners of modern tonnage will look to put up some resistance and hold their ideas of freight at WS230-235 going into next week.
MR
It’s been another quiet week for MR Owners basis full stem as enquiry remained sluggish. However, the market saw a new benchmark set in the north at 45 x WS180 for a xUKC run, the list here is tight tonnage and relief begins to arrive mid-month meaning prompt coverage will come at a premium. In the Med, the fresh test the market is waiting for is yet to arrive with a reported full-stem cargo tucked away under the radar. Ideas of freight here currently sit at WS155-160 with tonnage leaner at the top of the list, we could see the higher end of that range upon next done.
Panamax
Panamaxes have seen little to report this week as units continue to ballast to the USG immediately after discharge in the Cont. Enquiry remains elusive and struggles to surface. Some units need TA runs meaning levels will likely soften upon next done, but that window is soon closing as they will begin a slow ballast through the Med. In the Caribs, sentiment is steady/soft as enquiry is sporadic and units are available, levels are likely to trend downwards but at a slower pace than before.
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 | Sep 5th | Aug 29th | Last Month* | FFA Q3 | |
TD3C VLCC AG-China WS | 3 | 48 | 45 | 45 | 51 |
TD3C VLCC AG-China TCE $/day | 3,500 | 22,750 | 19,250 | 21,500 | 20,750 |
TD20 Suezmax WAF-UKC WS | -3 | 79 | 82 | 77 | 85 |
TD20 Suezmax WAF-UKC TCE $/day | -1,250 | 26,500 | 27,750 | 24,750 | 26,000 |
TD25 Aframax USG-UKC WS | -5 | 128 | 132 | 124 | 145 |
TD25 Aframax USG-UKC TCE $/day | -1,250 | 26,250 | 27,500 | 25,000 | 28,750 |
TC1 LR2 AG-Japan WS | 1 | 116 | 116 | 135 | |
TC1 LR2 AG-Japan TCE $/day | 250 | 21,000 | 20,750 | 28,750 | |
TC18 MR USG-Brazil WS | -6 | 199 | 204 | 220 | 224 |
TC18 MR USG-Brazil TCE $/day | -500 | 25,250 | 25,750 | 28,750 | 27,250 |
TC5 LR1 AG-Japan WS | 2 | 141 | 139 | 138 | 158 |
TC5 LR1 AG-Japan TCE $/day | 500 | 18,750 | 18,250 | 19,000 | 20,750 |
TC7 MR Singapore-EC Aus WS | -9 | 180 | 188 | 188 | 207 |
TC7 MR Singapore-EC Aus TCE $/day | -1,500 | 16,750 | 18,250 | 18,750 | 18,250 |
(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis
Bunker Prices ($/tonne)
wk on wk change | Sep 5th | Aug 29th | Last Month* | |
Rotterdam VLSFO | -17 | 537 | 554 | 533 |
Fujairah VLSFO | -3 | 611 | 614 | 576 |
Singapore VLSFO | +2 | 625 | 623 | 591 |
Rotterdam LSMGO | -19 | 641 | 660 | 664 |