Dry Bulk Capesize Leads, Tankers Diverge, and US Trade Actions Add New Uncertainty

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For the past decade, China has been the undisputed engine of global oil demand growth, accounting for a staggering 60% of the worldwide increase. This remarkable expansion was driven by its rapid economic development, urbanization, and the corresponding surge in transportation and industrial activity.

Crude Oil 

East of Suez

VLCC: The Middle East Gulf (AG) VLCC market had an uninspiring week, characterized by a drip-fed inquiry that prevented any significant momentum from building. Attention is now shifting to first decade August stems, with hopes for increased activity. Current rates are assessed at WS53.5 for AG/China and WS32 for AG/USG.

Suezmax: The Suezmax markets in the East firmed slightly this week, with a balanced tonnage list suggesting similar conditions for the coming week. Rates for Basrah west are around 140 x WS47.5 via C/C. Rates heading East remain steady with a firmer feel at around 130 x WS95.

Aframax: The week ended on a busier note for Aframaxes in Asia, as more ships were fixed privately. However, this activity was not enough to significantly move rates, which remained in check due to the previous week’s tepid demand. While a momentary spike could occur for late July due to tightness and potential replacements, the market appears to be moving into August fixing where the tonnage list opens up. Sentiment slightly improved for the region, with Indo/Oz 80 x WS112.5 assessed.

West Africa

VLCC: VLCC activity in West Africa has been ongoing but largely under the radar. Inquiry is expected to pick up for the mid-month loading window, where the tonnage list offers charterers more flexibility. Current rates for WAF/East are in the region of WS53.5.

Suezmax: The list for early dates was tight for Suezmaxes in West Africa throughout the week, leading to some challenging offers for charterers. However, with the list expected to open up over the weekend, rates are anticipated to be steady around WS87.5 for a TD20 run. Rates for voyages heading East continue to command a premium of about 10 points.

Mediterranean

Suezmax: The TD6 route (CPC/Augusta) saw an upward push this week due to replacement activity. However, on natural dates, rates are expected to remain around the WS95 mark. Rates for Libya/Ningbo remain relatively untested but are estimated by charterers to be around $4.2 million.

Aframax: Aframax owners in the Mediterranean market enjoyed a positive week after several underwhelming ones. Rates for a standard Ceyhan run started the week at WS127.5. As trading days progressed, charterers reacted to port delays and a thin tonnage list by increasing their fixing activity. This allowed owners to push rates, which reached WS130 and beyond for end-month Libya fixtures. The list remains very tight at the close, with Ceyhan runs reaching WS135, indicating continued firm sentiment.

US Gulf/Latin America

VLCC: Despite improved export cargo volumes from the Americas, the overall pace in the VLCC market remains sluggish. Freight levels have strengthened in line with sentiment, and the tonnage list continues to be a key focus across the Atlantic basin. The Brazil export market remained active with decent inquiry, but rates unfortunately corrected downwards. However, with signs of improvement in the US markets, rates are hopeful to stabilize next week. Current estimates are USG/China at $7.55 million and Brazil/China in the region of WS50.5.

Aframax (Local): Local Aframaxes saw minimal activity this week. Two out of the three reported WS125 for TD25 runs have details available in the market. Owners will attempt to maintain these levels, but further softening could occur next week unless there’s a significant increase in activity.

North Sea

Aframax: Cargo inquiry remained a rarity in the North Sea throughout the week, as available workable tonnage simply outweighed demand. Local rates reached lows of WS115, indicating the continuation of a “summer feel” in the market. While a couple of units were fixed for Libya stems, this had little impact on the prevailing soft sentiment in the North. A good amount of relet tonnage remains in the region, suggesting similar conditions for the beginning of next week.

Clean Products 

East of Suez

LR2: The LR2 market in the East experienced a significant clearing out of tonnage and an upward push in rates. Owners demonstrated a sensible approach, implementing gentle rate rises. TC1 (Middle East Gulf to Japan, 75kt) is now assessed at WS125, while a fresh test for West (presumably MEG to UKC/Continent) is seen at $3.7 million.

LR1: LR1 activity was also robust, leading to a tightening of the front end of the tonnage list. TC5 (Middle East Gulf to Japan, 55kt) is reported on subjects at WS147.5, and the West route (MEG to UKC/Continent) is at $2.9 million. The market anticipates that last-minute early stems or replacement requirements could put charterers in a tight spot, though the next fixing window is expected to bring some breathing room as more ships become available.

MR: It was a positive week for MRs in the Middle East Gulf (AG), with rates picking up in the second half of the week due to an uptick in inquiry. This has tightened the front-end tonnage list, and with end-month cargoes still to cover, owners are entering the weekend with a positive outlook. TC17 (Middle East Gulf to East Africa, 35kt) is pushing to WS220-225 levels, and TC12 (Naphtha Sikka (WCI) > Japan, 35kt) is at the WS160 mark.

UK Continent

MR: The UKC MR market saw rates push up significantly. The previous weeks’ poor earnings had led to tonnage being displaced away from the region, and this, combined with softening rates in the US Gulf (making transatlantic voyages less appealing at previous levels), created an environment conducive for owners to resist lower offers. Rates for a transatlantic (TA) run to the US Atlantic coast have consequently risen from the low WS90s to circa WS120 for a 37kt vessel. The prompt tonnage list remains tight, indicating that further replacements could face challenges. While this rise is beneficial for owners, it only brings rates marginally above previous yearly lows, suggesting owners believe there’s more upside potential in the coming weeks.

Handy: Handy owners in the North enjoyed a positive week, with levels improving by 25 Worldscale points for XUKC (Cross UK Continent) runs. With MRs firming and no longer acting as a cap on 30kt freight, and a shallow tonnage list, Handy owners were able to capitalize and push the market. Owners are bullish heading into the weekend, expecting itineraries to firm up after the break.

Mediterranean

MR: Increased cargo activity and a list primarily populated by discharging vessels led to an anticipated rise in MR rates in the Mediterranean. With tonnage displaced from both the UKC and Med regions, and widespread delays in European ports, finding a suitable ship for both owners and charterers has become tricky. This situation has been further exacerbated by a very strong Handy market. Rates have climbed from WS100 and are expected to close the weekend around WS115 for a 37kt TA/UKC (Transatlantic/UK Continent) run.

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Source: Gibson