The crude tanker market shows strong sentiment and rising rates across all major tanker segments (VLCC, Suezmax, and Aframax), driven by tighter tonnage supply and robust activity in the Atlantic and Middle East Gulf (MEG) regions, with “winter is coming” signaling a push for higher winter rates.
VLCC
- Supply/Demand Dynamics: The short-term supply/demand balance in the MEG (Middle East Gulf) is nearing a 1:1 ratio, indicating extreme tightness and pushing the market into “pick a number” territory where rates are highly volatile.
- Rates: A MEG/China run was recently fixed at W122.5, and owners are expected to push rates even higher.
- Atlantic Market: The Atlantic market is following the trend, with the USG/East route reportedly paid at a USD 13 million lump sum multiple times, despite this price not being supported by the current arbitrage.
- Outlook: Owners are showing little interest in discussions about future market balancing, driven by the strong current demand and the seasonal expectation of “Winter is coming” higher rates.
Suezmax
USG/Atlantic Tightness: Availability in the US Gulf (USG) is extremely low, with virtually no vessels in ballast or sailing within the next 10 days. Only one UKCM (UK-Continent/Mediterranean) ballaster is available for a pre-15/11 arrival in the USG.
- Rate Floor: The strong USG market is expected to continue drawing vessels from the Atlantic, reinforcing a rate floor of at least WS 140 on TD20 (West Africa to UK-Continent).
- West Africa (WAF) Market: Safe tonnage for WAF remains very short, and the CPC route (likely Caspian Pipeline Consortium to Augusta/Mediterranean) is attracting UKCM vessels.
- Advice: Forward coverage on an Eastern ballaster is advised for those with a WAF/East fixture in hand, as limited downside is expected going into the third decade of the month.
- MEG: VLCC strength has boosted sentiment, with a rate of W110 rumored on subs, which should help maintain or bolster Suezmax rates despite a longer list in the region.
Aframax
Mediterranean Market
- Activity and Rates: The Mediterranean market remains busy, and rates are stable at high levels, with the market virtually sold out for the first decade of November, and possibly sold-out for the CPC loading program for November.
- Tonnage Balance: The tonnage list is fairly balanced, though some LR2 (Long Range 2) tankers willing to carry DPP (Dirty Petroleum Products) have made the list seem slightly longer. However, these vessels are not offering significant discounts.
- Outlook: With the USG market also rising, Mediterranean rates are expected to hoover around last-done levels for the balance of the week.
North Sea Market
- Activity: Activity levels have not matched the Mediterranean. Some recent fixing, combined with relets and the use of larger vessels, has pushed availability past the first five days of the month.
- Rates and Direction: Rates rose last week and have remained steady. Vessels are largely ballasting South into the firm Mediterranean market, or towards the strengthening US market, as both offer appealing returns for owners.
- Outlook: Even with limited North Sea activity, there is very limited scope for downside due to the attractive alternative options available to owners in the South and West.
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Source: Fearnleys
