- MEG-China VLCC rates soared by 30% in a week, fueled by oil price volatility and trade concerns.
- The US paused tariffs on Canadian and Mexican oil, stabilizing short-term crude flows but leaving Q2 2025 uncertain.
- Aframax demand in Canada remains strong, but potential tariffs could drive a shift to Suezmax tankers for longer-haul routes.
The crude oil freight market remains turbulent, with VLCC rates surging on the MEG-China route. Market sentiment is stabilizing despite tonne-day demand showing no signs of recovery, reports Breakweave Advirsors.
US Tariff Pause Eases Immediate Concerns
The US temporarily suspended tariffs on Canadian and Mexican oil, averting immediate disruptions. Canadian crude exports to the US Atlantic Coast, which make up 60.3% of flows, remain steady for now.
If the tariff-free window holds, Q1 2025 volumes could reach 3.9-4.1 million tonnes. However, potential tariff reinstatement in Q2 could cut flows by 5-10%, forcing suppliers to explore markets in Europe, Asia, or the US Gulf.
VLCC Freight Rates See Major Spikes
VLCC freight rates for MEG-China surged to WS70, marking a 30% weekly and 63% monthly increase.
Meanwhile, Suezmax rates from West Africa to Europe climbed to WS90, showing a 30% monthly gain. The Baltic-Mediterranean Suezmax market held steady above WS90, up 12% month-over-month.
Aframax Market Holds, But Tariffs Pose Risks
Aframax tankers play a dominant role in Canadian oil exports, handling 42.2% of shipments.
With no immediate tariffs, Aframax utilization remains strong. However, if Q2 tariffs are reinstated, US-bound Aframax demand could drop, shifting cargo to Suezmaxes for longer routes, and potentially softening Aframax rates.
Panamax and LR2 Rates Drop Sharply
Panamax Carib-USG rates continued their decline, falling below WS120—more than 60% lower than last year. LR2 AG rates also plunged to WS100, marking a 60% yearly drop.
Meanwhile, MR1 Baltic-to-Continent rates declined 50% from last year, while MR2 Continent-USAC rates surged past WS200, showing a 47% monthly rise.
Crude Tanker Supply Trends Diverge
VLCC and Suezmax tanker availability remained below the annual average, while Aframax activity showed signs of recovery.
VLCC supply at Ras Tanura fell to 60 ships—13 below the annual average. Suezmax counts in West Africa remained 10 ships under the yearly trend. However, Aframax availability in the Mediterranean and Baltic increased slightly, signaling a potential market shift.
MR Tanker Tonne-Day Growth Remains Solid
Despite a slight softening, MR2 tonne-day demand remains strong, while MR1 demand continued its downward trend.
Aframax tonne-days showed a mild recovery, nearing the highest level since early January. Meanwhile, Panamax tonne-day growth lagged well below the annual average with no signs of recovery.
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Source: Breakweave Advisors
