The latest East-West divide

Lacklustre oil demand from China has been a leading story in tanker markets this year. In its annual report published in June, the IEA forecast Chinese demand growth of 480 kbd for 2024, which has been revised downwards several times this year, to now 150 kbd. The reasons cited behind the slowing demand growth are many, ranging from increased adoption of EVs and LNG trucks, to a slowdown in industrial activity and consumer spending.

As a result, crude imports have fallen by 440 kbd year on year. China doesn’t disclose its stockpiling numbers, but reports have suggested that a significant share of imports has flown into inventories. Further, refinery runs have consistently been below expectations, weighing on CPP exports and the broader clean tanker market. However, a factor that isn’t as easy to spot in the numbers is that China has been adjusting the sourcing of its crude. Imports from far flung regions have shrunk, while imports from nearby sources have grown.

In 2019, Chinese crude imports from ports to the west of the Suez Canal amounted to 3.8 mbd, and 5.2 mbd from ports to the east of the Suez Canal. So far in 2024, crude imports from ports west of Suez stand at 3.1 mbd, and 7 mbd from ports east of Suez. Whilst distances vary between ports west of Suez and east of Suez, this shift has likely resulted in lower tonne mile demand than could otherwise have been expected.

Large geopolitical changes have occurred since 2019, with notable shifts in trade flows as a result. China’s zero covid policy, the Russian invasion of Ukraine, and the de facto closure of the Red Sea to mainstream tankers by the Houthis have all strongly impacted seaborne crude flows. A significant share of the global oil trade is now transported by the grey fleet, which transports sanctioned oil flows from countries such as Russia, Iran, and Venezuela to countries willing to turn a blind eye, such as India and China.

Chinese imports from Russian ports west of Suez have been volatile, and 2024 levels so far have increased by 125 kbd compared to the same period in 2019. Notably, imports from ports in the East have grown steadily, increasing by 430 kbd in the same period. Whilst the growth in Russian seaborne crude exports to China is significant, the growth in Iranian flows to China is even greater. Imports from Iran have increased from 360 kbd to 1.2 mbd, partly due to strong increases in crude production. Meanwhile, imports from the rest of the Arabian Gulf increased from 3.7 mbd to 4.4 mbd, despite production cuts. In the same period, flows from crude exporters west of Suez such as West Africa, Libya, the North Sea, and Latin America have decreased sharply. Over half of the decline stems from West Africa, of which much is attributable to a decline in production.

It is difficult to quantify the overall impact on tonne mile demand, partly because the change in import patterns has been influenced by a shift from the mainstream tanker fleet to the grey fleet. However, it is clear that previously established long-haul exports into China have declined to the benefit of shorter haul trade patterns.

Chinese crude imports by origin (kbd)

Crude Oil

East

The start of Bahri week brought with it some positive news for VLCC owners, as last week’s Formosa quote turned out to be two stems. One of which was fixed on subs at WS50, a surprising improvement against the flow of action. As the week continued owners were having some success in continuing to push on rates.  Now as we close out the week owners will be in good spirits as TD3C sits at WS55. Certainly, the list has continued to thin out, but I think most would be surprised by the strength of this improvement. Today we are calling AG/China in the region of WS55 and 280 AG to USG fetches WS32 via cape.

With ballasters heading towards WAF trimming the AG list at the start of the week, most Suezmax owners thought their prospects may improve. After a poor few weeks, some under the radar activity in this region in the midweek picked up but ultimately the market never had any legs underneath it. We end the week with rates for a Basrah/Med run via cape paying 140 x WS57.5. For those owners looking to lock in for an East run we expect the rates to bottom at the 130 x WS97.5 level.

The anticipated softness for Aframaxes in the east was reflected in the indices as Bahri week concludes. AG/East closes lower than it started the week, with BITR printing 80 x WS146. A slightly firmer VLCC market could support the other sectors, expect enquiries for first decade December to emerge as the market returns. In Asia, activities were higher than the AG but it was not enough to move the needle in owners favour. A TD14 run was reportedly concluded at WS135, but this was not reflected for the Indo/Oz BITR as it closed the week at 80 x WS132. And now with the list replenished for December, expect charterers to be in the driving seat for the natural fixing window.

West Africa

A slow start in the WAF region for VLCCs with little reportedly working on the surface. As we moved through the week WS55 was achieved, which was up 3 points on last done levels. Owners have done well to make improvements against the slow and fragmented pace, and this continued throughout the course of the week with a WCI deal done at WS58. Looking ahead into next week the expectations are that levels will continue on an upwards trajectory. Off natural dates we estimate that on today’s market, a 260 WAF/China run would pay around WS56 level.

With Bahri week being the main talk of town, Suezmax owners with ships prompt in the Atlantic have been looking to move them on before units in behind come into play. As such the market in West Africa took a bit of a tumble to start the week before TD20 bottomed and owners showed resistance at the W75 level. Some upside remains in this region as rumours of end decade November stems could start to push the market in the right direction.

Mediterranean

The Med remains steady on Suezmaxes despite downward pressure from the smaller sizes in this region. The face to face fixing that was expected this year at Bahri hasn’t materialized leaving most in the East Med with the decision of whether to ballast tonnage to the Atlantic over the weekend. With CPC largely untested on the Suezmaxes, owners await enquiry here, as poor weather may come into play over next week with some delays expected. Today TD6 remains steady at 135 x WS92.5, for Libya/East arb runs owners will be looking to lock in at good returns for the final Quarter. Via the cape the levels remain around $4.4M.

An uneventful week for Aframaxes with activity remaining uninspiring for owners. Rates eased from low WS120s for vanilla XMeds down into the mid-high teens, with runs from CPC holding at WS120-122.5 levels to the Med. The outflux of ships to the states’ market has helped to thin the tonnage list somewhat and there are green shoots of hope as we reach the close. This will also be fed by the spectre of some very poor weather hitting northern Europe next week. Owners will hope these patterns transfer to the Med and some replacement activity hits. In addition, these are unexpectedly low freights for this period and charterers will look to profit from these levels next week, adding further fuel to the fire.

US Gulf/Latin America

There was little improvement in freight rates for VLCCs from USG this week even off the back of improved enquiry with a handful of cargoes working for both east/west runs. This region has received little support from the Aframax and Suezmax markets, however, the consensus is that rates have now bottomed for those segments. VLCC tonnage availability is whittling away, and we have now started to see an uptick for a USG/UKC run. The Brazil export market has had a steady flow of enquiry this week with levels improving owing to support from the WAF region. Today we expect a USG/China cargo to pay in the region of $7.35m and a Brazil/China run is around the WS55 level.

Aframaxes started the week in a very depressed state, falling to WS115 for trans-Atlantic runs but the week ends in recovery mode with WS125 and WS130 being put on subs with a couple of cargoes that remain outstanding. Would expect a continued push from owners for higher rates but that could quickly be erased with the next set of ballasters coming open.

North Sea

After a tepid start to the week, the gas came on a little bit for Aframaxes with plenty of units being snapped up in the latter stages. Rates haven’t really made any progress, but much needed activity is there. We are trading in the low to mid WS120s and can expect this to continue into the earlier stages of next week. Bad weather may well hold up tonnage tightening the list but for now there is still enough choice.

Crude Tanker Spot Rates (WS)

Clean Products

East

As Bahri week draws to a close it’s time to take stock of the market. As expected, a lot of direct deals done this week, mainly on the LR1s, and the front end goes into the weekend with a healthy number of ships on subs. The LR2s have been somewhat lacking in activity, but at the end of the day they were snapped up quickly at soft levels. TC1 at 75 x WS97.5 and West runs at $2.9m levels. As mentioned, the LR1s have been active, but the tonnage was well supplied at the start of the week and rates have been flat. TC5 at 55 x WS105 and West needing to be retested but we assess it at $2.5m for now.

As with most markets this week, the dust is settling in the MR market after Bahri week, and the familiar trend of off market activity has been seen. Levels have been largely sideways when tested but we have seen TC17 drop another 5 points and westbound repeated sub $2m. The week closes with a good number of relets either on hold or on subs and we should see the top of the list thin down if all get their subs come Monday. Expectation is for the sideways trend to continue but an injection of cargoes has the potential to thin the list up to end month.

Mediterranean

It’s been an up & down week for the Handies here in the Mediterranean though finishing on a positive note for owners. We began the week with XMed trading at the 30 x WS95 mark but with many vessels still needing to be cleared rates slipped further. 30 x WS90 is the lowest we have seen this XMed market all year but rates bounced back with reports of 30 x WS105 on subs at the end of the week. Heading into the weekend a couple of cargoes remain outstanding and with further end/early cargoes expected on Monday owners will be hoping they can build on the progress made in the last 2 days.

Now to the Med MR market where it’s been a positive week with rates firming and good activity levels. 37 x WS95 was the call for Med/TA on Monday but with the list tight on the front-end rates improved after an influx of cargoes midweek. Med/TA is now trading at the 37 x WS110 mark with WAF expected to positively correct off the back of this. As we approach the weekend only one cargo remains but expect owners to be bullish with their ideas.

UK Continent 

Unsurprisingly this week for the MRs in the UKC has been a little up and down due to industry events in Dubai. That said, owners will be quietly pleased with this week’s productivity, and we see a good number of WAF stems quoted for the first time in a while. These joining the other quoted XUKC runs gives momentum heading into next week as we await to see whether this is the start of good things to finally come for this market. 

An uninspiring week has passed for Handies in the North as cargoes have been drip-fed into the market. Most of the fixing has happened via MRs as more options have been available from charterers from that sector. At the time of writing there was an influx of cargoes (mainly on the MRs) so there is a chance that if the market improves the Handies will ride on the MRs coattails. Owners becoming more bullish with potential building. 

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

The north picked up where it left off last week, with enquiry continuing to clip units away from an already tight list causing levels to quickly firm to 30 x WS207.5 before firming further to 30 x WS 210. Despite a calmer end to the week, the list remains tight. Looking ahead to next week’s trading should enquiry surface early, we expect levels to continue to kick on.

In the Med, prompt tonnage has continued to be chipped away leaving the top of the list in a much healthier state for owners. A mixture of Bahri week, off-market deals and under-the-radar activity has played into owners’ hands as levels firmed from 30 x WS165 and a prompt replacement cargo was reported at WS 170. Availability remains for charterers, but levels feel firm at 30 x WS167.5 for a standard XMed run, and owners are feeling bullish. 

MR

Despite the handy activity, unfortunately, the same cannot be said about the MR market. Enquiry struggled to surface leaving owners looking to part-cargoes for employment. In the North, tonnage remains thin before WMed ballast units arrived mid-third decade bringing some reprieve. Ideas of freight sit between 45 x WS145-150 for XUKC runs. In the Med, availability is there towards the top of the list, however we expect owners to dig their heels in at the 45 x WS115 level.

Panamax

Levels are proving to hold steady at the 55 x WS130 mark after another cont-TA run repeats at these levels. WS130 is now a solid benchmark on which to evaluate future deals. Tonnage begins to arrive towards the end month in the north and we expect rates to remain at last done levels. Over in the USG/Caribs, an oversupply of tonnage is softening levels and causing sentiment to stay soft. On a positive note, enquiry has begun to clear some units, but more enquiry is needed to steady levels.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeNov 14thNov 7thLast Month*FFA Q4
TD3C VLCC AG-China WS754475857
TD3C VLCC AG-China TCE $/day9,50033,00023,50036,50030,750
TD20 Suezmax WAF-UKC WS-1076858990
TD20 Suezmax WAF-UKC TCE $/day-6,00024,50030,50031,75029,500
TD25 Aframax USG-UKC WS-23111134175157
TD25 Aframax USG-UKC TCE $/day-8,25020,50028,75043,25033,750
TC1 LR2 AG-Japan WS-19596116 
TC1 LR2 AG-Japan TCE $/day014,75014,75021,250
TC18 MR USG-Brazil WS-21196217270215
TC18 MR USG-Brazil TCE $/day-3,75024,50028,25038,75025,250
TC5 LR1 AG-Japan WS1106105125124
TC5 LR1 AG-Japan TCE $/day75011,00010,25015,25013,500
TC7 MR Singapore-EC Aus WS0158158181182
TC7 MR Singapore-EC Aus TCE $/day25013,75013,50017,25015,000

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

Bunker Prices ($/tonne)

wk on wk changeNov 14thNov 7thLast Month*
Rotterdam VLSFO  +1519518553
Fujairah VLSFO  -16561577597
Singapore VLSFO  -11575586609
Rotterdam LSMGO  +0666666681

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