Canadian crude oil, with a 25% premium, is becoming less competitive in the US market. This could lead to reduced exports to the US and increased exports to Asian markets, where Canadian producers may offer discounts to attract buyers, reports Breakwave Advisors.
Robust jet/kero imports
Asia jet/kero imports reached over 350kbd in Nov, surpassing 2019 average levels of 340kbd
➔ Robust jet fuel demand has supported the Asia jet regrade (Argus), which has flipped to positive since mid-Oct
Colder weather in Northeast Asia has driven heating demand
➔ Seasonal heating demand has supported higher kerosene imports into Japan, which have reached a 9-month high
➔ South Korea increased its jet/kero imports as local refiners prioritize kerosene production for domestic use
➔ This has supported APAC MR tonne-mile demand
On the export side, the Wider Arabian Sea ramped up jet/kero exports to Asia amid a closed East-West arbitrage
➔ Increased longer-haul voyages from the Wider Arabian Sea have supported LR1 tonne-mile demand to East Asia
Shift in Europe-destined voyages
Suezmaxes have increasingly shifted to regional trades as VLCCs dominate long-haul routes
Going off a year-on-year seasonal outlook, Suezmax tonne-miles demand for Europe-bound voyages has exceeded the eight-year seasonal range for much of 2024
➔ Bolstered by stronger demand from West Africa, Gulf of Mexico, and Middle East Gulf, where tonne-miles have outperformed compared to last year
However, the number of crude-carrying Suezmax voyages originating from Wider Northwest Europe and the Wider Mediterranean reached a three-month high in November
➔ Drop off in Suezmax longer-haul voyages originating from South Atlantic, North America East Coast, and the Wider Arabian Sea, have reached four-month lows
➔ This will likely place downward pressure on Atlantic Basin Suezmax tonne-miles demand towards Europe
Falling ballast speeds
Strong fleet growth and limited liquefaction capacity additions have contributed to an oversupply of LNG carriers this year, putting downward pressure on freight rates
The excess vessel availability is highlighted by a decline in the average speeds of the fleet at the start of the winter season
➔ This dynamic is a reversal of recent historical trends where LNG freight demand typically peaks during this period as key demand markets in Europe and Asia ramp up stockpiling.
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Source: Breakwave Advisors
