WAF-East VLCC Rates Reach Eight-Month High On Tonnage Scarcity And Robust Demand

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  • The West African Very Large Crude Carrier (VLCC) market experienced a surge in rates, reaching an eight-month high.
  • It is attributed to a clear-out of tonnage in the Atlantic region, steady fixing activity, and support from strengthened rates in the Persian Gulf and Brazilian markets.

WAF-East VLCC Rates Hit Eight-Month High

The West African VLCC market witnessed a significant spike in rates since the beginning of February, reaching its highest level in eight months, according to Platts, part of S&P Global Commodity Insights. This surge is attributed to several factors, including a sudden clearing of the tonnage pool in the Atlantic region, consistent under-the-surface fixing activity, and support from strengthening rates in the Persian Gulf and Brazilian markets.

Factors Driving the Surge

1. Tight Tonnage List: There is a notable lack of vessels globally, with numerous deals in the U.S. Gulf and West Africa happening off-market. Many fixtures are being settled privately, contributing to a tight tonnage list.

2. Increased Demand: A need for oil due to lower stocks worldwide has led to increased demand for shipping. Ships are missing due to circumventing the Cape of Good Hope, and the overall demand for oil remains high.

3. Market Momentum: Despite initial expectations of slow activity during the Lunar New Year, the market picked up momentum from Tuesday, February 13, onwards. Tonnage lists are reported to be extremely tight.

4. Saudi Stem List: The expected release of the Saudi stem list in the coming week could further support the VLCC segment. However, efforts may be made to prevent rates from spiraling out of control.

WAF-UKC VLCC Market Movement

Freight rates for the WAF-UK/Continent VLCC market have also risen significantly, reaching their highest level since October 2023. While this route sees less activity compared to WAF-East VLCC voyages, the firming market has led to increased rates. The Worldscale premium between WAF-UKC VLCC and WAF-East VLCC has widened to around 10 points.

Despite the rapid rise in WAF-UKC VLCC rates, the upward movement in the more liquid WAF-UKC Suezmax route has been less dramatic. However, industry participants expect Suezmax rates to catch up with VLCCs over the coming week.

This surge in rates highlights the ongoing challenges and dynamics in the global shipping market, influenced by factors such as regional demand, tight tonnage supply, and private fixing activities.

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Source: SPglobal