In the East, Suezmaxes increased their share in the fuel oil trade in May, driven by Russian DPP cargoes and high HSFO demand in the Middle East. Long-range tankers from the Middle East are pivoting towards the Atlantic Basin, but weak European diesel demand is redirecting some voyages to the Pacific, potentially increasing competition with MR tankers. In the West, Aframax TD25 rates rose due to increased US Gulf-Europe inquiries and a shortage of Suezmax ballasters. Meanwhile, NW Europe’s MR2 market faces supply pressure, with prompt availability at a yearly high, driving down TC2 rates despite a slight demand recovery, reports Break Wave Advisors.
East Analysis
- Suezmax Surge in Fuel Oil Trade: Suezmaxes saw a 35% increase in fuel oil voyages in May, driven largely by Russian DPP cargoes. Aframaxes, conversely, experienced a 5% decline. With a hot Middle Eastern summer predicted, high HSFO demand may sustain Suezmax engagement.
- Long-Range Tankers Shift East: LR tankers from the Middle East are pivoting towards the Atlantic Basin due to rising middle distillates exports. However, weak European diesel demand is redirecting some voyages back to the Pacific, potentially intensifying competition with MR tankers.
West Analysis
- Aframax Support from Suezmax Shortage: Aframax TD25 rates rose 20% month-on-month due to increased US Gulf-Europe inquiries and a 14-month low in Suezmax blasters, widening the Aframax-Suezmax trade spread to $25/ton.
- MR2 Supply Pressure in NW Europe: NW Europe’s prompt MR2 availability reached a yearly high since mid-May, leading to a 25% drop in TC2 rates. Increased US Gulf naphtha imports and higher North American arrivals have bolstered MR2 supply, overshadowing a modest demand recovery. Future MR demand may rise post-maintenance, but oversupply and weak European diesel demand will likely cap gains.
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Source: Break Wave Advisors
