The week gone by has been a roller coaster ride in the VLCC market. The whole of last week saw a continued upward trajectory culminating at W105 MEG/east, repeated several times.
VLCC Market
The VLCC market has been highly volatile this week. Following a consistent upward trend that peaked with rates reaching W105 for the Middle East Gulf to East Asia route, the market faced a moment of uncertainty. A couple of fixtures were reported at W95, but independent owners refused to acknowledge these “relet” deals, maintaining their asking rates. Their persistence paid off, as the Baltic’s TD15 estimate came in at W102, with several fixtures confirming rates around the W100 mark. While the market’s downside appears capped for now, a surge in shipping costs and WTI premiums has effectively closed the US-Asia oil arbitrage, which may put a damper on the Atlantic market.
Suezmax Market
The Suezmax market is showing signs of mounting pressure, with charterers actively picking up vessels for second-decade voyages from West Africa. While the list of available tonnage is reasonable, the weekend did not bring a large number of new ships into position. The strong performance of the VLCCs in the Middle East Gulf is expected to trickle down and lend support to Suezmax rates, even with a healthier list of available vessels. However, a lack of demand impetus from the Black Sea and US Gulf regions may prevent a substantial upward move.
Aframax Market
The Aframax market is mixed, with different trends in the North Sea and the Mediterranean.
North Sea The market has been slow, clearing out the last of the September stems. Available tonnage remains relatively tight, but a lack of strong demand for early October is expected to keep the market stable. A number of vessels have ballasted to the US and Mediterranean recently, which could further ease supply in the North Sea. The US market, which had been soft, is now seeing an uptick in activity, which is expected to attract more ballasting and help rates bounce back firmer.
Mediterranean Cargo flow remains healthy in the Mediterranean, with the early part of the first decade in the Mediterranean and Black Sea almost fully booked. This has kept rates firm, and despite a few vessels being picked up, there is still enough tonnage for local and longer runs. As with the North Sea, increased activity in the US Gulf is likely to attract more vessels to ballast to that region, hoping for a market bounce.
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Source: Fearnleys
