Stepping Back

Despite a partial lifting of sanctions against Venezuela in October last year, the US is now set to reimpose sanctions on the country’s oil industry in April, due to insufficient progress towards holding free and fair presidential elections; a key condition of sustained sanctions relief. The original deal which was to last for a period of six months, saw the return of Venezuelan crude to the mainstream market and an increase in cargo liftings by largely non dark fleet tankers as traders and charterers became confident in lifting Venezuelan barrels once again.

During this period, Venezuelan crude exports have increased but there remains some ambiguity. According to the AIS data, flows have averaged 470kbd over the past three months compared to 370kbd between August and October, whilst the market also saw the return of buyers in India. However, the true level remains opaque, and the actual figure is probably higher than tracked cargo flows, especially to the Far East. A return of Venezuela to the sanctioned market will support the dark fleet once again as mainstream tankers re-exit this trade.

In terms of production, the IEA estimated flat output in December versus November at 800kbd. While PDVSA has signalled its intention of increasing production from present levels, this is likely to prove challenging given current production difficulties and the need to repair existing infrastructure as well as bring fresh investment online. If the country is to head back into a sanctions framework, this will add further complexity in reaching higher output levels given the difficulty of securing international support and investment outside of the nation’s close allies and partners and what has already been provided by Iran, Russia, and China.

However, recent developments related to both the opposition primary elections where the primary winner Maria Corina Machado has been barred from holding public office and the result declared illegitimate. Along with a criminal investigation launched into the primary organisers, this puts into question the prospects of the upcoming Presidential election scheduled for 2024. All of which would have likely added pressure to the deal at a later stage, had the US not announced ending this period of sanctions relief.

Additionally, pressure came towards the end of last year from a December 3rd referendum to annex the Essequibo region of neighbouring Guyana. The results and validity of this referendum have been called into question by the international community, particularly the US, given poll numbers and reported voter turnout figures. This led to an increase in Venezuelan military activity on the border, and an executive order from President Maduro to begin oil, gas, and mineral exploration in the disputed zone. Although recent weeks since have shown a cooling of tensions and commitments to a dialogue instead of force between the countries.

These issues mean Venezuela is now set to rejoin the sanctioned oil market alongside Russia and Iran. Although it is important to note that the US government has left the option open for the Maduro regime to recommit to the original deal, there appears little indication of a significant improvement which would warrant a reversal of the US government’s decision. These developments show the potential fragility of oil sanctions relief deals as well as ongoing US commitment to upholding the other end of the deal in such a case.

Given current oil prices, it is clear that the Biden Administration does not currently feel the pressure to ease sanctions in order to lower fuel prices. This suggests that going forwards, the US is unlikely to make compromises in order to obtain sanctions relief on Iran and Russia, ensuring a large black oil market remains for the time being.

Tracked Venezuela Crude Exports (kbd)

Crude Oil

Middle East

It has been a busy week for VLCCs in the AG as Charterers moved to cover second decade, which saw some confidence return to the market. We did witness an uptick in rates going East, although by week’s end that mini rally seems to have stalled. Owners are hoping for another upturn next week as Charterers are expected to be moving early in the week to cover before the Lunar New Year celebration begins. Today we are calling 270 AG/China at ws 58.5 and 280 AG/USG remains at ws 44.5.

The AG hasn’t seen a great deal of enquiry this week and those who have quoted have received a multitude of offers. Today rates stand somewhere around 140,000mt x ws 80 for Basrah/UKCM via c/c. Rates to head East remain soft and Charterers are likely to be looking to break 130,000mt x ws 125 today for AG/East.

It has been another positive week for Owners in the AG. Charterers have continued to pluck ships from the list, mainly for AG/East runs and with few ballasters on the horizon from Singapore or even WCI, the list is beginning to thin as we look ahead. Owners are taking note, and their ideas are inching up. Rates close the week around 80 x ws 190-195 level. 

West Africa

VLCC Owners had a productive week in WAF as Chinese Charterers took coverage off early February and early March dates. Freight rates improved accordingly as Owners’ sentiment firmed and there was a reluctance to repeat the last done, meaning Charterers had to dig a bit deeper to cover than they would have anticipated. However, there is some concern that the USG market remains weak and that could make the push for higher rates a little bit harder.  Today we are expecting a WAF/China to fix at ws 61 level.

Suezmax markets are stagnant in West Africa and for Nigeria load, there will be resistance from Owners. TD20 today we estimate at 130,000mt x ws 107.5. Rates to head East currently have a premium of around ws 5 points.

Mediterranean

The market in the Med/BSea had a busy start to the week from CPC, although Med enquiry has been very slow and there are prompt ships available should anyone need one. Rates for TD6 today are approximately 135,000mt x ws 130. Cargoes heading East remain untested since the trouble has begun in the Red Sea.  It doesn’t seem many Charterers looking to transit the area, rates are approximately $7.3M for Libya/Ningbo (c/c).

From a Charterer’s perspective conditions changed favourably this week, with levels declining from ws 220 to ws 190 levels for an X-Med voyage. With this in mind, it’s fair to say Owners’ sentiment has been affected. It’s worth noting as well that in recent weeks Owners haven’t been forced to compete particularly hard for employment; however, this week they were given such a reminder!  Around the mid-week point, we saw a high market, but in this instance it brought Suezmaxes into play for part cargoes (X-Med), and from then on Owners had no choice but to concede their attempts to hang onto last-done value. Looking ahead, expectations would point towards conditions softening further before Owners can expect any green shoots of recovery.

US Gulf/Latin America

Another disappointing week for VLCCs in this sector as weak export volume demand due to refinery maintenance kept Owners under pressure and caused a further build-up of available tonnage. On the brighter side, there are some indications that the market has now bottomed out and with improvements seen in WAF and AG, there could be an improvement next week.  We expect a USG / China run will fix in the region of just $8.9m in today’s market, while Brazil/China is paying around ws 59 level.

North Sea

It was a relatively quiet week in the North Aframax market when it came to surface volume. However, some queries for fuel oil moves kept Owners occupied. At the beginning of the week, X-Nsea was traded at ws 180 levels. But as tonnage continues to return from the USG, we find ourselves with an unbalanced list and as a result, we close at ws 162.5 for this run. With surrounding markets also suffering a decline in sentiment, we anticipate further degradation in rates as we move into the new week.

Crude Tanker Spot Rates (WS)

Clean Products

East

It was a pretty unsettled week on the LRs with Owner’s ambition and some hype flowing into the start of the week yet ending on a more than 10% loss on TC1! Red Sea issues remain the dominant factor of course and Owners and Charterers have had a standoff on the LR2s for West runs – even though on LR1s the big refiners had to finally set rates with their contract partners.

TC1 has stuck at ws 350 all week but last night Trafigura took two vessels at ws 315 and we can see this dropping to the ws 300 level before settling. A Russian trading vessel fixed at $8.5 million for AG/UKC via the Cape and this would imply $9.0 million for non-Russian trading tonnage. But nothing has been done and Owners ideas have hovered at $10 million which was always going to be hard to achieve. The TC1 fall will not help Owners and really confirms West runs are likely to begin with an 8.

LR1s managed to get $7.4 million on subjects for a 60,000mt Jet AG/UKC run but if they get confirmed now seems the debate. Plenty of LR1s have failed this week and so far, no higher than $7.0 million has been fixed. TC5 sits around 55,000mt at ws 350 and so has some separation to the LR2s which will help. Singapore runs have driven the market sentiment a lot these last few days with ws 400 and ws 395 both put on subs but with ws 375 now, more realism is returning.

But talks of ceasefires which so far have turned out to be overly optimistic, have seen speculation of how quickly rates could fall if things do calm down – and it seems like Owners may not risk missing some big rates and take what’s available in the coming week.

Much of the steam has been taken out of the MR market East of Suez this week where much slower flow of cargoes and rumblings in the last 24 hours of a ceasefire have paused activity. Despite a flat end to the week where $100k has been taken off cross AG and ws 425 is now on subs for TC17, levels and earnings are still incredibly good. The list still isn’t full of options and we’re fixing 2 weeks out so throw into the equation prompter replacements and earlier loading cargos then ws 400 is not expected to be broken yet. Despite seeing some WAF openers ballast South to head around the Cape and a handful of MRs in the Med surfacing willing Red Sea load, there is very little in terms of an uptick in resupply.

The decent cargo activity continued in the North Asia. The rate rally is not as strong as last week but sentiment remains strong. The benchmark South Korea/Singapore rate went up 175k to $1.625 million and Aussie rates gained 70 points to ws 400.  It’s not only pre-CNY driven as cargoes are coming from China, Korea, Japan and Taiwan.  In South East Asia, regional cargo is very limited but it is strongly supported by other regions – around 10 ships were taken away by the North and the AG, hence sentiment here stays strong too. TC7 went on 40 points to ws 350.

Mediterranean

It’s been a lacklustre week for the Handies here in the Mediterranean, with rates softening from the off. We started the week with last done at 30 x ws 330-mark for X-Med; however, after a build-up of tonnage over the weekend rates soon slipped down to 30 x ws 285. Slow enquiry since then has seen the pressure continue to mount, with X-Med now trading at 30 x ws 245. BSea levels have also followed suit, with +40 premium still intact. Heading into the weekend there is little left to cover, so expect pressure to continue come Monday.

In the Med MR market rates have come under pressure this week due to a heavily weakened TC2 sector. However, enquiry levels in the Med this week haven’t been too bad and as a result rates in this sector have managed to hold a touch higher than their UKC counterparts. At the time of writing 37 x ws 150 is on subs for TC2 and with 37 x ws 175 also on subs ex Sines, vanilla Med/TA rates are expected to negatively correct off the back of this.

UK Continent 

MR Owners in the UKC have had the rug pulled from underneath their feet this week, with one of the slowest levels of market enquiry seen for quite some time. WAF runs have been practically non-existent (apart from a little Friday pm action) and the very few TC2 stems have had the pick of the litter for available tonnage, which unsurprisingly has got cheaper and cheaper as the week has progressed. As we reach Friday, we see some additional testing and 37 x ws 150 has become the new low. This sector has taken a hit as we await to see if these lows can produce an influx of enquiry.

It has been a week to forget for Handy Owners in the North, with minimal fixing action to report throughout. The collapse seen in the MR market has added extra weight to our tonnage lists, as MRs looked to compete on short-haul Handy cargoes to avoid locking in long hauls at falling freight rates. Subsequently, levels have taken a hit and at the time of writing latest on X-UKC is 30 x ws 210 and 30 x ws 200 for UKC/MED. Pressure on the Owners’ shoulders here.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

This week saw just enough enquiry for Owners gain ground and rates edged closer to ws 330. Charterers were not exactly spoilt for choice, but there have been a couple of failings at the back end of the week, stalling any chance of a push for now.

This week’s Med performance was lackluster, with fresh opportunities lacking throughout. Tonnage is starting to build and sub- ws 300 levels will be on the cards shortly.

MR

A similar story has played out on the MRs again this week, where 45kt stems have been drip-fed into the Continent and Mediterranean, forcing Owners to find coverage mainly on a part-cargo basis. In the North, workable units were mainly showing in the West Med, but they were soon taken from the list by Med employment. In the latter half of the week, a 45kt test finally arrived, with reports of ws 235 (23) on subs to head to the Med. Due to the recent lack of full stem enquiry, levels are expected to remain steady leading into week 6. Conditions in the Med have mirrored the North after one unit fixed 45 @ ws 240 (23) earlier in the week. However, with rates potentially softening in surrounding areas, Owners will be hoping this will not have a knock-on effect on the MRs.

Panamax

It has been a sluggish week for the Panamax market as Owners have struggled to find local employment for their vessels and TA. Despite tonnage options being limited for Charterers to choose from, a fresh test will be needed again to identify true market levels while we endure this dry spell of activity. The States market continues to offer better opportunities, as levels held between the ws 330-335 range this week.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeFeb 1stJan 25thLast Month*FFA Q1
TD3C VLCC AG-China WS-058585763
TD3C VLCC AG-China TCE $/day-25028,00028,25029,00034,250
TD20 Suezmax WAF-UKC WS-4106110136116
TD20 Suezmax WAF-UKC TCE $/day-3,25035,75039,00055,50042,500
TD25 Aframax USG-UKC WS-18185203281209
TD25 Aframax USG-UKC TCE $/day-7,00041,75048,75077,75050,750
TC1 LR2 AG-Japan WS-31323354169 
TC1 LR2 AG-Japan TCE $/day-11,25090,250101,50036,500
TC18 MR USG-Brazil WS+3219216216220
TC18 MR USG-Brazil TCE $/day-50023,25023,75024,50023,750
TC5 LR1 AG-Japan WS-23356379190267
TC5 LR1 AG-Japan TCE $/day-6,25072,50078,75030,00049,000
TC7 MR Singapore-EC Aus WS+23344321235266
TC7 MR Singapore-EC Aus TCE $/day+4,00043,00039,00024,25028,750

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

Bunker Price s ($/tonne)

wk on wk changeFeb 1stJan 25thLast Month*
Rotterdam VLSFO  +7575568560
Fujairah VLSFO  +5621616610
Singapore VLSFO  +5636631602
Rotterdam LSMGO  +22803781741

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