This week, Breakwave Advisors presents an in-depth look at the VLCC (Very Large Crude Carrier) supply situation in the Arabian Gulf (AG), focusing on net supply growth, Baltic rates (TD3), and cargo demand projections over the next month.
VLCC Supply & Baltic Rate Trends
The data indicates a historical correlation between VLCC net supply in the AG and Baltic rates, with fluctuations often leading to rate volatility. A sharp rise in supply earlier in March caused a decline in Baltic rates, but a recent supply adjustment suggests a potential rebound if the trend continues.
Supply vs. Demand Projections
Gross supply currently outpaces cargo demand, reflecting a loose market. Unless demand picks up, rates may face downward pressure. However, any disruptions could tighten the market and support a rate increase.
China’s Impact on Crude Oil Demand
As China remains a key player in crude oil imports, any shifts in its demand could significantly influence VLCC freight rates. A projected recovery in Chinese crude demand in Q2 2025 could tighten vessel supply and drive rates up.
Other Market Insights
- VLCC rates for MEG-China routes remain below WS60, with little momentum.
- Suezmax rates are rising, particularly for West Africa to Europe and Baltic-Mediterranean routes.
- Aframax rates in the Mediterranean are declining.
- MR1 and MR2 rates for various routes have experienced notable fluctuations, with increases on some routes and declines on others.
The vessel availability data shows a declining trend in VLCCs, Suezmax, and Aframax vessels, suggesting tightening in the second half of March.
Overall, market conditions remain fluid, with potential rate shifts depending on changes in supply-demand dynamics, particularly driven by China’s crude oil demand.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: Breakwave Advisors
