Despite the upward trajectory having stalled, the VLCC market remained firm for the past few days in the W90-95 range MEG/east (pending of the ship/voyage in question).
Very Large Crude Carrier (VLCC) Market
The VLCC market experienced a slight rate correction following a period of firm, stalled upward movement.
- Rate Correction in the Middle East Gulf (MEG): The previously firm market, generally trading in the W90-95 range for MEG/East voyages, softened recently. Charterers initially created a narrative that a large portion of the November program was covered, but a trickle of new cargoes widened the position list.
- Downward Pressure: Owners’ confidence was tested when a MEG/Vietnam voyage was concluded at W85, followed by a MEG/Taiwan fixture at W82.5, signaling downward pressure.
- Atlantic Rates: The Atlantic market also saw adjustment, with a Brazil/China fixture at W86, though the supported TD15 rate was just under the W90 mark.
- Forward Outlook: With the MEG/East rates having dropped around 10 points, the Atlantic market is expected to follow suit. A positive sign is the improved West/East arb (arbitrage), which may increase charterers’ interest in US Gulf/East voyages.
Suezmax Market
The Suezmax sector remains fundamentally healthy but is susceptible to a slight rate correction due to muted current activity and building tonnage.
- Muted Activity: Surface-level activity is low, as a number of vessels have been tucked away off-market in both the East and West.
- Tonnage Build-Up: Charterers are not rushing to fix second-decade TD20/Guyana/US Gulf cargoes, allowing the available tonnage list to grow.
- Expectation: A slight downward correction from the highs of the previous week is anticipated, but a complete “implosion” is not expected due to healthy fundamentals.
- Mediterranean Option: Suezmaxes have the option of taking part cargoes in the Mediterranean as an alternative to wait for full loads, using this avenue to kill time or take advantage of Aframax dates.
- Near-Term Outlook: Activity is expected to pick up as charterers start seeking coverage for the three-week window, which is now out to November 12.
Aframax Market
The Aframax market remains firm across the North Sea and Mediterranean, with rates in the latter showing significant strength.
- North Sea: The North Sea market, currently fixing end-month cargoes, has firmed, albeit slowly, following the general trend of other western Aframax markets.
- Tonnage Balance: Available tonnage in the North Sea is tight because vessels have been leaving the area for better returns elsewhere. Sentiment is expected to remain firm despite limited November activity.
- Mediterranean Strength: The Mediterranean market is exceptionally strong, with the TD19 route almost reaching the WS200 mark, a jump of nearly 40 points from the prior week.
- Regional Competition: The local tonnage list in the Mediterranean remains thin. This high rate is attracting vessels from the UK Continent (UKC) and is also being monitored by Suezmaxes looking to take profit or find better value than a North Sea run.
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Source: Fearnleys
