Global tanker markets are facing shifts due to geopolitical risks and changing trade routes. Russian oil exports and naphtha demand offer some support, but oversupply and reduced demand in key regions present challenges. This report covers trends in the East and West of Suez markets, focusing on Russian crude transport, naphtha trade, and declining US Gulf Coast crude departures.
Increased Russian Oil Transport via Cape of Good Hope
Russian dirty petroleum product (DPP) tonne-miles reached a six-month high in September 2024, driven by increased Cape of Good Hope transits. This shift, influenced by fears of Houthi attacks, mainly applies to voyages towards Southeast and Northeast Asia. However, voyages towards the Middle East Gulf continue to use the Bab el-Mandeb/Suez Canal route, with a notable increase in voyage distances supporting Suezmax demand.
Naphtha Trade Boosts LR Demand Despite High Supply
Naphtha trade to Asia, especially from Europe, has been a bright spot for Long-Range (LR) tanker demand. An open arbitrage has led to higher tonne-mile demand for naphtha, with Asian ethylene cracker operators favouring naphtha over LPG. However, high LR vessel supply in regions like the Mediterranean and the Middle East Gulf has kept freight rates low, despite robust naphtha demand.
Lower US Gulf Coast Crude Departures
US Gulf Coast crude and condensate departures have declined due to reduced demand from East of Suez markets and poor refining margins in Asia. Fewer long-haul cargoes have been purchased from the US, with Chinese refiners favouring cheaper Russian oil. In Europe, seasonal refinery maintenance and the return of Libyan barrels further reduced demand for US crude.
These factors are shaping the current landscape of the global tanker markets, with regional demand and geopolitical risks continuing to influence trade flows.
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Source: Breakwave Advisors
