While the world’s attention is understandably glued to the escalating conflict between Israel and Iran and its immediate impact on energy shipping via the Strait of Hormuz, the European Union is quietly advancing its 18th package of sanctions against Russia. Expected to be decided upon next week, these measures, though less dramatic than missile strikes, could have profound and lasting implications for the global tanker market.
Crude Oil
The global tanker market is experiencing significant volatility, largely driven by escalating geopolitical tensions, particularly in the Middle East, alongside shifts in regional demand. Here’s a breakdown by region and vessel type:
East
VLCCs (Very Large Crude Carriers): Rates in the Arabian Gulf (AG) have soared to yearly high levels as owners factor in heightened risk. After a slow start due to delayed Saudi stems, their release acted as a catalyst, pushing rates up with each reported fixture. This upward trend is expected to continue into next week, although any signs of de-escalation on the political front could cause rates to stabilize. Current assessments for AG/China are WS79 and AG/USG WS46.
Suezmax: Suezmax rates have also improved throughout the week due to persistent tensions in the East. With the booming VLCC market and a tight tonnage list, further increases are anticipated next week. Rates for voyages heading East are currently difficult to call due to limited recent activity, but they are unlikely to fall below 140 x WS55 (via C/C). Similarly, rates for westbound journeys are hard to forecast, but owners will push for above 130MT x WS125. All eyes remain on this region, which is poised for further rate increases.
Asia (Aframaxes): Sentiment in Asia has been heavily influenced by Middle East uncertainty and stronger demand for northbound cargoes amidst a tight list of vessels available for end-of-month loading. Rates for Indonesia/up routes have risen by WS22 points since the start of the week, with potential for further upside from replacement jobs for short northbound runs. The sustainability of these rates for July stems remains a question, as charterers are holding off for tonnage to replenish, but the bullish pace has been set. Rates out of Australia have also benefited from a very attractive LR2 (Long Range 2) market, which makes Aframaxes economically favorable, leading owners to exert upward pressure. Overall, it was a bullish week in the East, with Indonesia/Australia assessed at 80 x WS125.
West Africa
Suezmax: Suezmax rates in West Africa have stabilized around WS90 for a standard TD20 run, despite ample tonnage. The strong sentiment persists, and with a firmer Arabian Gulf market, fewer ballast voyages from the East are expected, which should support rates.
VLCC: VLCC activity in West Africa was notably low this week, a sharp contrast to the previous week. However, owners remain bullish, buoyed by improvements in other sectors, particularly the Arabian Gulf. The market is due for a fresh test, but rates will certainly be significantly higher than previous levels. West Africa/East is currently assessed in the region of WS72.5.
Mediterranean
Suezmax (TD6): The TD6 route is relatively flat around WS105. There’s a healthy supply of ships that charterers are trying to push for lower rates, but owner morale remains high. Rates for Mediterranean/East voyages need a fresh test; some eager players are still looking for these runs, and rates are estimated around $4.5 million, with potential for significant increases once a few key units are booked.
Aframax: Aframax owners were hesitant at the start of the week due to geopolitical disruption, waiting for premiums to solidify. A lack of cargo eventually led to offers for the limited available shipments, confirming rates. While the rise wasn’t as high as owners hoped, rates climbed to the WS140s for XMED stems and WS157.5 for CPC loaders, with replacement activity reinforcing these rates by week’s end. The warming market in the Americas has also drawn some ships away from Europe, which will help prevent rates from falling too quickly in the short term.
US Gulf/Latin America
VLCC (USG Exports): The US Gulf export market saw a recovery this week, driven by bullish sentiment from other regions and increased activity that reduced the available vessel list. Most of the activity was eastbound, and there’s still room for rates to climb further.
VLCC (Brazil Exports): Brazil exports had a stable week, but rates began to firm towards the end as owners reacted to improved sentiment elsewhere. Current assessments are USG/China $8.1 million and Brazil/China WS69.
Aframax: Aframax rates in this region retreated this week after last week’s WS160 TD25 deal failed, settling at around WS140- 145 for most transactions. Owners now appear poised to hold back and attempt another rally next week.
North Sea
Aframax: The North Sea market remains stubbornly flat, with rates hovering around WS120-125 for an extended period, unaffected even by political crises. A slow start to the week allowed rates to ease slightly from WS122.5 to WS120, which has become the going rate for recent fixtures. While a few ballast voyages to the Americas offer a glimmer of hope for remaining owners, the lack of consistent fixing means this remains just a glimmer for now.
Clean Products
East
The Middle East saw a very volatile week, with VLCC (Very Large Crude Carrier) rates in the Arabian Gulf (AG) reaching yearly highs due to market nervousness and uncertainty surrounding the political situation. Charterers were actively seeking forward fixes, with consistent off-market deals supporting the surging headline rates. TC1 (Middle East Gulf to Japan) reached 75 x WS215 and UKC (via Cape) was at $5.3 million. For LR1s (Long Range 1), TC5 (Middle East Gulf to Japan) hit 55 x WS225 and UKC was at $4.0 million. The market expects Monday to remain volatile, depending on how the political situation unfolds over the weekend.
The MR (Medium Range) tanker market in the Middle East was incredibly punchy, with an unbalanced supply of tonnage and strong bullish sentiment pushing freight levels sky-high. TC17 (Middle East Gulf to East Africa) was tested as high as WS365, TC12 (West Coast India to Japan) as high as WS260 equivalent, and short-haul cross-Gulf routes entered the $700k bracket. While these high earnings are expected to attract more tonnage from Southeast Asia in the next window, fragile geopolitical factors deter any predictions of a softening market.
UK Continent
The UK Continent market, unfortunately, fell flat despite initial potential. A slow but steady flow of inquiry faced a well-stocked tonnage list. West Africa (WAF) remained quiet, with most inquiry focused on Trans-Atlantic (TA) routes, causing rates to slip to near year lows of 37 x WS120. Owners took on some 30kt short cross-UKC stems to pass the time, but the market struggled to gain much traction. Lists are expected to remain well-stocked with laden vessels heading this way. There’s some promise of potential in the US Gulf market and the hope of more WAF stems, with larger tonnage eyeing Eastern markets.
For UKC Handy owners, the week was challenging due to competition from larger MRs. Despite a thin tonnage list, charterers comfortably covered by switching between sizes, leading to rates shrinking under pressure. Cross-UKC rates finished around the 30 x WS140-145 region. Unless the MRs shift, short-term rate improvement is not anticipated.
Med
The MR Mediterranean market continued to outperform the UKC sector by about 10 points due to a lack of naturally opening positions, but owners still faced year lows for TC2 (Continent to US Atlantic Coast), resulting in only around 37 x WS135 for TA voyages. While a couple of trickier grades saw slight improvement, the overall struggle in the Handy market makes significant upside unlikely.
Handy owners in the Med found it tough to build pressure this week, facing a stacked tonnage list. However, an active start to the week cleared a good portion of vessels, with 30 x WS130 being repeated numerous times and occasional 30 x WS135 fixtures. The week ended with 30 x WS135 as the last done, but with limited prompt tonnage and many fixed vessels opening towards month-end, it remains to be seen if owners can carry momentum into Monday.
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Source: Gibson
