Supply Swell

News around the crude market has recently been dominated by headlines about weak Chinese oil demand on one side and conflict in the Middle East threatening supply on the other. For now, the influence of slower demand appears to outweigh geopolitical tensions; however, oil markets could face further pressure into 2025 as a wave of new oil supply hits the market.

OPEC+ recently cut demand expectations to 2.11 mbd of growth in 2024. Even though we are well into the second half of the year this demand has not yet materialised, which may require further downward revisions to their projections and casts doubt on their 2025 forecast for a demand increase of 1.78 mbd. The IEA is more conservative and expects a moderate 0.97 mbd of demand growth in 2024, followed by 0.95 mbd in 2025.

These numbers are in stark contrast to the supply outlook. Both North American and Latin American supply growth will continue into 2025, with the US and Canada alone contributing 740 kbd of additional supply. In Latin America, both Brazilian and Guyanese crude production has been going from strength to strength, and in 2025 they will add 290 kbd and 100 kbd, respectively. The additions from non-OPEC+ countries are expected to come to 1.5 mbd, with OPEC+ sources adding 400 kbd, if voluntary OPEC+ supply cuts stay in place. In total, the IEA expects an additional 1.9 mbd of oil supply to come online next year. The current OPEC+ position is to ease supply curbs starting from October by 180 kbd, increased to 227 kbd in January, with the entire 2.2 mbd cut from January this year to be shelved by November 2025. Thus, total supply growth could be much higher.

Demand growth is mostly expected in Asia, which means most of the additional supply is headed for long haul export. However, of the 0.95 mbd in extra demand the IEA predicts in 2025, 320 kbd are expected to come from China, and it remains unclear whether this will materialise. The IEA anticipated 500 kbd of Chinese demand growth in 2024 earlier in the year but revised this down to 300 kbd in their latest report. According to Bloomberg data Chinese crude imports in H1 2024 were down 3% compared to the same period in the previous year, and 7% of this total, or 800 kbd, were used to fill up strategic stockpiles. This may indicate that actual demand estimates may trend lower still, unless some form of stimulus is introduced. One of the biggest drivers behind lacklustre demand in China is the uptake of new energy vehicles comprised of LNG and EVs, for which sales reached over 50% of retail sales for the first time in July 2024.

Overall, the IEA predicts that markets will be oversupplied by at circa 850 kbd in 2025. Long life projects for most producers mean that they will be unable to cut production to stabilise prices, and so far only OPEC+ have shown themselves willing to play this role. US shale producers are capable of short-term supply cuts, but at what price point shale producers would curtail output remains unclear. OPEC+ have already hinted that if demand remains weak, they may keep the production cuts in place for longer to stabilise the market.

Iraq, Kazakhstan, and Russia have been exceeding their quotas and have consequently agreed to further supply constraints to stick to production targets. Further lack of compliance may lead to strife within the group, who are holding back a total of 7.5 mbd of spare production capacity. Barring larger than expected growth in demand, and if OPEC+ members are unable to keep supply constrained, the market seems destined to be oversupplied in 2025. This could prompt an increase in storage demand, perhaps on tankers if the situation were to become extreme.

Oil supply and demand forecasts

Crude Oil

East

Rates nosedived this week as as the pace of fixing slowed. Owners’ sentiment has weakened accordingly and a few market quotes exposed the weakness as Charterers were able to fix at considerably below last done levels. These new levels may entice Charterers to show cargoes, but the market feels muted as we head into a UK holiday weekend.  Today we are pitching AG/China at WS52.5 while a 280 AG/USG should fetch in the region of WS33 via C/C.

Suexmax enquiry has been pretty sluggish the second half of this week, but rates remain steady at around WS110 for AG/East. With VLCCs falling away we could see some pressure next week, though the list is still somewhat tight.

It’s been a slightly improved week of Aframax activity in the East. That said, rates have continued to slip away with AG/East hovering at 80 x WS145. Rates should remain stable now at this level as the tonnage list looks a little more balanced.

West Africa

This sector witnessed yet another quiet week as Chinese Charterers continue prefer the lower prices on offer from Brazil so cargoes are now mainly being sold into Europe. Freight levels have begun to drop off after the latest downturn in the AG but on the flip side the rates from the USG remain firm and this gives Owners other options which is always welcome. On today’s market we estimate that the current rate for WAF/China is hovering around the WS56 level. 

The Suezmax list is tighter for naturally placed ships in the USG and with that, rates are pushing up in the Atlantic basin despite West Africa remaining quiet. Today we are calling WAF/UKC at WS82.5.

Mediterranean

The Mediterranean market for Aframaxes did not provide the excitement Owners were hoping for. The pruned list was ripe for capitalisation, but the continued lack of Libyan stems caused Owners to eventually lose faith. We saw fixing at WS125 for xMed stems and WS140 for CPC stems but as we hit the close WS122.5 was concluded for a Ceyhan loader and WS135 was achieved at least twice for CPC. As we look towards the next days there are rumours that more Libyan ports will be offline as political unrest takes hold and this will have a negative effect on rates despite meagre gains across the pond.

The Med Suezmax market has seen limited activity this week but rates in the market remain steady at WS90 for Black Sea/Med, with Owners having options to ballast out to WAF or the USG.

US Gulf/Latin America

This area continues to be the most lucrative sector for VLCC Owners as stable demand combined with strong resistance has seen rates move upwards from USG especially on long East runs. Brazil export levels did soften a bit on the back of weaker WAF and AG markets, but with cargo volume levels expected to increase as we enter Q4, this is likely to remain Owners preferred area of choice. Today we expect a USG/China cargo to pay in the region of $7.7m and a Brazil / China run is around WS55 level.  

Aframaxes in the USG have been fairly quiet this week as Charterers have worked to pick off tonnage quietly, giving the impression of slowdown, which has left rates hovering around WS137.5 for USG/TA.  

North Sea

The North Sea Aframax market has traded sideways for the past few weeks but there has been an element of action in the last couple of days. Not to say that this will buck the trend but it has thinned the early part of the list for typical local players. Those willing to leave the region are still in play, local has been the main attention and will likely finish the week in the same vain.

Crude Tanker Spot Rates (WS)

Clean Products

East

A more positive week at last, although a lot of work is needed to get rates back to near where we were trading only a month ago. LR2s were busier but with the dire LR1 rates all value was on the smaller size and LR2 levels could not firm until the LR1s pushed up. 75,000 mt naphtha AG/Japan has stabilised at WS130 and will remain available into next week. 90,000 mt jet AG/UKC has stuck to $4m even though Owners were keen to try and push this higher. With KPC getting 6 offers and the first counter being taken, LR2s will have to be patient. 

LR1s finally seem to have turned the corner which is exactly what the market was waiting for. 55,000 mt Naphtha AG/Japan moved up from WS112.5 at its annual low last week to WS140 this morning. 60,000 Jet AG/UKC should now see rises in line with the TC5 firming and towards $3.5m – this then may allow room for the LR2s to also push again – but this will take a bit of time. Overall September is seeing good volume and this is expected to continue.

Another busy week for the MRs but with the vast majority of business being done off market and privately, rates have remained flat for a second week running. West is settled at $2.2-2.25m, TC12 at WS150 and EAFR at WS200-205. Hopefully next week remains as busy – but Owners need to work a bit harder to push rates further.

Mediterranean

It’s been a busy week for the Handies in the Mediterranean with strong levels of cargo enquiry throughout and as a result rates have firmed up from start to finish. 30 x WS170 was the call for xMed on Monday morning which was heavily repeated at first but after an influx of enquiry midweek helped shrink the list, rates soon bounced up with 30 x WS200 achieved for cabotage. At the time of writing vanilla xMed sits at the 30 x WS210 mark and with the list looking tight up till end-month dates Owners remain bullish with their ideas. 

Despite some consistent enquiry for Med MRs over the first half of the week, rates have come under pressure to a well-supplied list. We began the week with vanilla Med/TA at the 37 x WS135 mark but fresh lists pulled on Monday morning showed an armada of tonnage and as a result rates soon slipped to the 37 x WS120 mark. This is where levels have remained ever since with WAF expected to land at a 20-point premium when next tested. A quiet finish is expected with little left to cover into the weekend.

UK Continent 

The summer market is still in full swing for MRs plying their trade in the North as a lacklustre week draws to a close. TC2 has bounced around the 37 x WS117.5-122.5 mark and WAF traded at +20 WS points. There is still a good number of units to clear from the list before this market will show any signs of a bounce back, but question marks remain with how much enquiry will be seen in the short term. More of the same is expected here.

It has been a busier week for Handies in the North although rates have only slightly improved as there has been a healthy amount of supply for Charterers to pick and choose. XUKC closes at 30 x WS135 and UKC/MED is in need of a fresh test but should land at 30 x WS125. Potential for a push if enquiry persists.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

An active start to the week in the North cleared well-vetted and modern tonnage quickly leaving the list looking tight and Owners feeling bullish. WS235 repeated as Charterers looked to cover cargoes early before the bank holiday weekend. Should enquiry surface early into next week, we expect to see levels begin to firm. In the Med the opposite is true, enquiry has been slow throughout the week with the bulk of activity carried out off-market. Numerous failed deals have only added to the negative pressure as tonnage continues to build. Levels began the week at WS225 before softening to 30 x WS220 by the end of the week’s trading. Looking to next week, early September stems will need to be plentiful, otherwise further softening is likely.

MR

MRs have seen little by way of full-stem enquiry this week, in the North, levels sit around the 45 x WS170-175 mark, however as tonnage has been clipped away for part cargoes, we will see some resistance from Owners upon next test as tonnage looks tight. In the Med, units remain plentiful with tonnage spread throughout the list. Early in the week firming looked on the cards as WS210 was reported for a tricky cargo but soon failed which dampened Owners’ ideas. Levels for xMed currently sit at around WS160 although Charterers will look to test these levels down.

Panamax

Little activity is to be reported for Panamaxes again this week. Tonnage is available to Charterers and with units needing TA voyages, levels will likely be tested down upon next test. However, much like in the Caribs, as Afras in the North firm, we could see Charterers look to Panamaxes for shorter haul voyages. TD21 appears to have finally found its floor, mainly off the back of firming surrounding markets. Owners will hope to look like the better-valued choice as we head into next week if a rebound is to be seen.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

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

wk on wk changeAug 22ndAug 15thLast Month*FFA Q3
TD3C VLCC AG-China WS-653595952
TD3C VLCC AG-China TCE $/day-7,75030,50038,25037,25023,500
TD20 Suezmax WAF-UKC WS479758788
TD20 Suezmax WAF-UKC TCE $/day3,00025,75022,75030,50027,250
TD25 Aframax USG-UKC WS14136122160153
TD25 Aframax USG-UKC TCE $/day5,75029,00023,25037,50031,500
TC1 LR2 AG-Japan WS-6131137148 
TC1 LR2 AG-Japan TCE $/day3,75027,00023,25033,000
TC18 MR USG-Brazil WS34236202243228
TC18 MR USG-Brazil TCE $/day7,25032,25025,00032,75027,750
TC5 LR1 AG-Japan WS2126124156162
TC5 LR1 AG-Japan TCE $/day50015,75015,25023,50022,750
TC7 MR Singapore-EC Aus WS1191190203217
TC7 MR Singapore-EC Aus TCE $/day25019,25019,00021,25020,750

Bunker Prices ($/tonne)

wk on wk changeAug 22ndAug 15thLast Month*
Rotterdam VLSFO  -34526560557
Fujairah VLSFO  +6595589601
Singapore VLSFO  +8608600606
Rotterdam LSMGO  -47644691706

Print the report