Falling Freight Rates In West Africa’s Tanker Market: A Deep Dive

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Freight rates for dirty tankers in the West African (WAF) region have experienced a significant decline over the past week. This reduction is attributed to several factors, including lower cargo demand, a build-up of idle vessels, and a slowdown in the US Gulf market.

Supply-Demand Shift

The downward trend in WAF tanker rates is primarily driven by a supply-demand imbalance. As cargo demand decreased and a surplus of free-of-cargo vessels accumulated, charterers gained more negotiating power, leading to a downward revision in freight rates. This shift in fundamentals coincided with a cooldown in the US Gulf sector, which further influenced the rates.

Impact on Suezmax and VLCC Markets

The recent decline has affected both the Suezmax and Very Large Crude Carrier (VLCC) segments, with the WAF Suezmax market seeing a sharper drop. Platts assessed freight on the 135,000 mt West Africa-UK/Continent route at $16.98/mt on April 19, down 20% from the previous week. Similarly, the WAF VLCC market has come under pressure, with a 6% reduction in the WAF-Far East route freight, signalling a broader market downturn.

Seasonal and Geographic Factors

Seasonal factors also play a role in the declining freight rates, with the summer months typically experiencing lower demand compared to winter. Additionally, pressure from softening Persian Gulf VLCC and WAF Suezmax markets contributes to the overall retreat in rates. As the loading window moves closer to summer, further rate reductions are anticipated, with lower levels of fixing expected as the industry enters a traditionally quieter period.

Overall, the West African tanker market is facing a challenging period due to a combination of lower demand, an oversupply of vessels, and seasonal trends. This may lead to further adjustments in freight rates and shifting market dynamics in the weeks ahead.

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Source: S&P Global