WAF Crude Tanker Rates Plummet to 10-Month Lows Amid Weak Demand

“Things have been quiet — we’re in a very typical summer market now,” a Europe-based shipbroker said. “The US Gulf, which is usually the driving force for the West market, is also weak.”

A London-based Suezmax broker agreed with this view, also pointing to a saturated tonnage list as another reason for the decline in rates.

“There’s less cargo demand in summer, with countries using their reserves, and barrels have been going unsold recently, so we’re not seeing the demand,” the broker said.

According to a second London-based Suezmax broker, although the WAF market may be reaching a bottom, “the US Gulf and Guyana [markets] aren’t in great shape, and until they pick, things up could be rough.”

WAF-UKC Suezmax rates are currently near to levels where the market bottomed in August and September of last year, so it is difficult to predict whether rates will continue falling or remain steady in the short term, a third London-based Suezmax broker said.

Sluggish VLCC rates

Larger ship sizes have also fared poorly recently, with Platts assessing freight on the 260,000 mt WAF-East route at $18.48/mt on Aug. 6 — near to its lowest level since Oct. 10, and down from its latest high of $26.81/mt on May 21.

“It’s an underwhelming market currently — speaking to owners, they think the floor has been found, but there’s unlikely to be a major recovery in the short term,” a London-based VLCC broker said.

A Europe-based shipowner cited tepid cargo demand levels, in part due to OPEC+ production cuts leading to a decrease in monthly shipments loading in the Persian Gulf, as well as a seasonal lull in heating demand in Europe and the US.

“[Charterers] are reluctant to come to the market,” the owner said.

Nevertheless, WAF VLCC rates have been prevented from falling even further by owners’ reluctance to lock in longer eastbound voyages while the market is in a downturn, opting to fix shorter voyages from the Persian Gulf instead, according to sources.

Q4 could herald recovery

Despite bearish headwinds looking likely to prevail in the short term, market sources generally expect rates to begin to recover as the fourth quarter approaches.

“We have another few weeks left I think, hopefully things get better soon,” the first London-based broker said, adding that “earnings for owners aren’t currently horrific.”

“Oil stocks are lower everywhere and prices are lower, so we should start to see demand pick up as we approach the winter,” the Europe-based shipowner said. “I don’t think we’re in a catastrophe — I think the market will settle down.”