The Long View

Oil demand will peak this decade, that is the call by the International Energy Agency (IEA) who released their Oil 2024 report this week. The agency is now forecasting global oil demand growth to slow for the remainder of this decade, peaking in 2029 at 105.6 mbd from 103.2 mbd in 2024 and slip marginally to 105.4 mbd in 2030. The bulk of this demand growth, as expected will come from India and China, and other emerging Asian nations, primarily the petrochemical sector and aviation demand. The growing electrification of road transport will continue to pressure road fuel demand, with gasoline demand expected to fall by 1.6 mbd by 2030.

Most of this gasoline demand loss will come from developed OECD nations as the energy transition gathers pace. The only bright spots for oil demand in the advanced economies is likely to be small increases in jet fuel demand and petrochemical feedstocks in the US. Europe is expected to see gasoil/diesel demand fall from 6.4 mbd in 2024 to 5.7 mbd in 2030 as both industrial and transport demand give way to electrification.

On the supply side, non-OPEC+ production is expected to increase significantly, exceeding global demand with a supply glut of at least 8 mbd. Between now and 2030, supply is forecast to rise by 6 mbd from 102.9 mbd to 113.8 mbd. Although 45% of this will come from NGLs and gas condensates requiring the use of gas carriers and not tankers. Non-OPEC production is set to increase by 4.6 mbd, with 2.1 mbd coming from the US and a further 2.7 mbd coming from a combination of Brazil, Guyana, Canada and Argentina. Core OPEC supply is expected to increase from 33.1 mbd in 2024 to 34.1 mbd in 2030, driven by expansions in the Middle East, specifically the UAE, Iraq, Kuwait and Saudi Arabia. Meanwhile African members will continue to see production difficulties driving their output even lower from existing levels.

For the refining sector, slowing global demand growth and the energy transition will increase the pressure. Atlantic basin refinery throughput is expected to peak in 2025 and East of Suez in 2028. Overall global refinery runs will increase 2.1 mbd by 2030 driven by a 2.7 mbd increase East of Suez, while West of Suez will see a 600kbd contraction. Refiners will increasingly be forced to modify their crude slates to reflect lower road fuel demand and pivot towards petrochemical feedstock as well as invest in biofuel production.

What does all this mean for the tanker markets? Firstly, for the crude tanker sector, although peak demand is in sight, the overall volume of cargo which will need to be shipped is still large. This combined with an ageing fleet, stricter environmental regulations and a large pool of vessels engaged in sanctioned trades mean that the global crude market is likely to remain healthy past 2030. Rising Atlantic crude supply combined a growing structural crude supply deficit in Asia will see higher West/East crude flows. This should result in a continued expansion in crude tonne miles into the next decade. For the product tanker market, the outlook may be more challenging as road fuel demand eases by the end of the decade and more demand is centered in the East, closer the anticipated domestically orientated refining capacity This could counter some of the tonne mile demand growth we have seen in recent years.

Likewise, the shift in demand from conventional refined products to biofuels, petrochemical feedstocks and NGLs will result in new opportunities for specialized and chemical tankers as well as the gas carrier fleets. For both crude and product tankers, this period will undoubtedly result in some readjustment, but fleet supply fundamentals should be able to offset these changing patterns or in the case of the crude sector, likely provide a stable source of support beyond 2030. However, it is important to note that this is just one view while others such as OPEC and other forecasting agencies are taking a more bullish view about when oil demand will peak.

IEA Global Oil Demand Forecast (mbd)

Crude Oil

Middle East

VLCC rates have experienced a significant decline this week. The market has been affected by reduced demand and increased competition for last decade cargoes. The current oversupply of tonnage will spillover into July and with EID holidays next week, it is unlikely to pick up for a while. Today we are calling 270 AG/China ws 51  and 280 AG/USG is now at ws 33 level.

The AG Suezmax market has fallen away this week, largely due to the larger sizes encroaching. With VLCCs still in play for West runs, Suezmax Owners are likely to be pushed for TD23 runs to a 140,000mt x ws 67.5 level via the Cape. To head East the market is capped by the VLCCs at around ws 107.5 for East, though one would be hard-pressed to find a Suezmax Owner willing to at these levels.

A somber week in the East as a clear divide in activity between Bab el Mandeb (BEM) players and non-BEM players became evident. AG/RSea runs continued to soak up much of the tonnage opening in the Red Sea. However, those ballasters from the East which cannot transit, have faced difficulty finding some action. As a result, there is a build-up of tonnage willing to do TD8 runs with Charterers now expected to target below 80,000mt x ws 200 levels for AG/East. With the Eid celebrations upon us, a slow start will be expected next week with further pressure mounting on Owners.

West Africa

West Africa experienced another quiet week, with VLCC Charterers being able to chip away at last-done levels as the amount of Eastern ballasters looking to escape the falling AG market put downward pressure on an already overcrowded tonnage list. The omens for next week do not look good, as AG is expected to be quiet, so all eyes will be focused on the US export market to stimulate this sector. On today’s market, we estimate that the current rate for WAF/China should be around ws 56 level.

Suezmax markets in West Africa have started to soften, with the Americas beginning to run out of steam. For TD20 today, Charterers will be aiming to break 130,000mt x ws 110.

Mediterranean

TD6 is under pressure with a weak Aframax market that will prevent part-cargoes from attracting Suezmaxes. For TD6 we estimate this today at 135,000mt x ws 125. Rates to head East have a slightly softer feel, and we feel a level of $5.3M for Libya/Ningbo via the Cape is achievable.

The week began unimpressively for Aframax Owners in the Med as the Posidonia hangover continued. A combination of a lack of ballasters leaving the Med and port disruption easing in certain cases allowed sentiment to weaken and discounts were achieved as the week progressed. A vanilla Ceyhan run began the week at ws 177.5 levels with COC in the ws 190s but by the close ws 157.5 and ws 167.5 were achieved respectively. A couple of Owners who were stocked long had no option other than to accept what was on offer to move some ships along but with these out of the way, the rest of the market is now considering the bottom to be close given the North Sea and US markets remaining relatively positive.

US Gulf/Latin America

The USG VLCC market has faced mixed dynamics this week. While there have been some positive developments in terms of increased enquiry, the downturn in adjacent sectors has negatively affected sentiment. There is some hope that exports will increase to make up for the shortfall from AG and WAF but currently like in other areas, there is an oversupply of available tonnage. The Brazil export market had a quiet week, with only a couple of stems appearing in the later part of the week, but rates here are also on the downward path. We  expect  a USG/China run will fix in the region of $8.2m  while we estimate a Brazil/China run is  paying  around ws 55  level

North Sea

Following a bit of an exodus in the North Sea we have seen some decent enquiry and rates have held up this week. The foundations are solid but it feels like a bit of rainfall will prevent upward progress for now. We see the market stable at ws 172.5 levels.

Crude Tanker Spot Rates (WS)

Clean Products

East

As expected, it was a busy week for the LR2s seeing most of the action. We saw the floor and have quickly seen a bounce back on rates at the list starts to thin out. AG/West Jet is on subs at $6.1M and TC1 is on subs at 75,000mt x ws 200 for multiple units. Heading into the weekend there is still a number of open stems which owners will now be using as a spring board to push rates on. The LR1s have ticked along but certainly haven’t seen the lions share of action. A number of units are still open on the front end. Positions are mainly dominated by the larger pool owners and will surely be cleared away early next week with contract liftings. TC5 on subs at 55,000mt x ws 240 is a good number heading into the weekend, but the West needs a true fresh test and we currently asses this at the $4.5M levels. Owners will be hoping the long weekend with both Singapore and the UAE off on Monday will not impact this positive sentiment, however, expect Charterers to use this little respite to ease the building head of steam.

Like most markets this week the MRs East of Suez were hoping to see a resurgence in activity and a post Posidonia stream of fixing. Instead the hangover continued and by mid week the lack of cargo flow was starting to concern some Owners who were hoping to get their next up units squared away before another long weekend. Inevitably rates have been eroded with TC17 in the ws 330’s and TC12 retested down to low ws 240’s level while Westbound is in need of a fresh test. Further East, the market has also taken a breather so we don’t expect to see a swing in AG sentiment any time soon.

Mediterranean

It’s been a miserable week for the Handys here in the Mediterranean which has seen rates take a tumble throughout. We began the week with XMed trading at 30,000mt x ws 210 but with poor enquiry over the course of the week, prompt tonnage has been able to build and rates have suffered. 30,000mt x ws 170 is now on subs and with an abundance of prompt tonnage still to clear the pressure is expected to continue into next week. Market weak.

Finally to the MRs in the Mediterranean where they have taken a bit of a fall from grace with limited enquiry for the majority and a very full Handy market in tow also. A couple of market quotes midweek gave us a fresh chance for a test and we saw 37,000mt x ws 160 now the call for Med/TA. This sits a touch below or in par with the UKC sector now and with zero outstanding coming into the weekend, Owners will be walking into next week a little on the back foot.

UK Continent 

Again a bit of a rollercoaster of emotions for Handy owners, but just minus the rates really moving anywhere. The 30,000mt x ws 170 level was found pretty quickly early on in the week, and just as momentum picked up for the MRs and a few more Handy ships went on subs, we saw a handful of failures and then a lack of fresh stems. Friday similarly has given us a few more cargoes with rates bouncing between ws 165-170 and moving into next week we can expect Owners to try to ride the coattails of the MR market to gain any positivity.

For the UKC MR market, with rates subdued on Monday morning, Charterers took advantage of the situation of low freight as we saw a very active start to the week for TC2 runs clearing a good chunk of excess tonnage away. With this, Owners started to gain a little momentum and we saw the 37,000mt x ws 140 levels improve up to ws 165 come Wednesday. But just as Owners were dreaming of more, Charterers slammed the brakes on with a few WDWFs and the market went quiet. We see a few more stems quoted Friday morning which should just about give Owners enough to take some positivity into next week, but no doubt they would have been hoping for more after the start of the week we had.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

As the week commenced, it was not the start that Owners would have hoped for in The North considering the firm tonnage available remained thin on the ground. Enquiry was slow to surface and remained somewhat muted as the week progressed. Eventually, the opportunity for Owners to push rates arrived with ws 295 on subs by Thursday. The list remains tight but if we are to see levels pushed further then next week needs to start with a bang.

In The Med, the week began with ws 295 on subs bss a central Med load. It did not take long for further units to start lengthening the list and in turn, the current levels started to look shaky. Eventually, we saw the market tested with rates around the ws 280 mark reported respectively. We close the week with tonnage availability in good supply and it is likely we will see the market tested further.

MR

Another quiet week for MR Owners in the North, unsurprisingly considering the few naturally positioned units located in the region. A few units lurking around the West Med were called into action as the market finally witnessed a well-needed test.

The Med has seen the better of full stem enquiry once again with ws 210 reported early in the week before a Med/UKC run set new softer levels at the equivalent of ws 200. MR tonnage is distributed throughout the list, giving Charterers options for both prompt and more forward coverage allowing for further testing of levels.

Panamax

Firm enquiry for Panamaxes has remained scarce, with last week’s benchmark set for a Cont/TA run, Owners would have hoped to have something on which to build. This, coupled with few workable units is leaving sentiment flat and with no outstanding stems known, it may stay that way for a while. It’s a more positive outlook in the Caribs as a tighter surrounding Aframax market has made Panaxames more attractive to Charterers, though there is tonnage to work through before levels can firm further.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

wk on wk changeJun 13thJun 6thLast Month*FFA Q2
TD3C VLCC AG-China WS-351547261
TD3C VLCC AG-China TCE $/day-4,25028,25032,50053,25035,000
TD20 Suezmax WAF-UKC WS+4114110102110
TD20 Suezmax WAF-UKC TCE $/day+1,75047,00045,25039,00040,250
TD25 Aframax USG-UKC WS+29229200166190
TD25 Aframax USG-UKC TCE $/day+9,75063,25053,50039,50045,000
TC1 LR2 AG-Japan WS-3201204247 
TC1 LR2 AG-Japan TCE $/day-1,75052,25054,00068,000
TC18 MR USG-Brazil WS-88213301203246
TC18 MR USG-Brazil TCE $/day-17,75027,00044,75025,00030,250
TC5 LR1 AG-Japan WS-16229245269237
TC5 LR1 AG-Japan TCE $/day-4,50043,00047,50052,50042,500
TC7 MR Singapore-EC Aus WS-8319327314304
TC7 MR Singapore-EC Aus TCE $/day-1,75042,75044,50041,25036,750

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

Bunker Prices ($/tonne)

wk on wk changeJun 13thJun 6thLast Month*
Rotterdam VLSFO  +22543521562
Fujairah VLSFO  +25595570617
Singapore VLSFO  +22593571619
Rotterdam LSMGO  +30731701731

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