The escalating tensions between Israel and Iran, culminating in the recent air strikes and retaliatory threats, will undoubtedly have a significant and multifaceted impact on the tanker markets.
Crude Oil
East – Middle East Gulf (AG):
- VLCC Market (Very Large Crude Carrier): The AG VLCC market remained challenging initially due to lower-than-expected activity and ample tonnage. However, the overnight attack on Iran has completely shifted sentiment. Owners are now hesitant to commit their vessels until the situation stabilizes. Despite a plethora of cargoes reported for end-June/early-July, owners are likely to increase their rates as a precaution, irrespective of the weekend developments.
- Current call for AG/China: WS53.5
- Current call for AG/USG: WS30
- Suezmax Market: Tension in the Middle East has made the Suezmax market here extremely difficult to call, with rates highly susceptible to rapid change.
- Estimates for West-bound rates could exceed 140 x WS47.5 via C/C.
- Rates to go East are also difficult to forecast but are unlikely to be below 130 x WS95.
- Sentiment here is highly volatile and could change quickly over the weekend.
West Africa:
- VLCC Market: The West Africa (WAF) VLCC market finally saw a surge in activity, particularly for runs to the Far East. However, rates were readjusted downwards due to weak sentiment in adjacent areas and a generous position list. Increased geopolitical tension in the Middle East may lead to more East ballasters next week, potentially dampening any hopes of recovery.
- Current call for WAF/East: WS52.5.
- Suezmax Market: Similar to the East, Suezmaxes in West Africa are tricky to fix as most owners are holding back. Sentiment is expected to improve with better levels of enquiry.
- Rates for a standard TD20 run are expected to be around WS77.5, heavily dependent on the unfolding events in the coming days.
Mediterranean:
- Suezmax Market: The TD6 route (135,000 mt CPC/Augusta) held steady at WS95 throughout the week. Owners are sitting on the fence, not expecting realistic rates until the situation in the East becomes clearer. Rates for the Libya to Ningbo run are relatively soft, with some players keen on this route. Charterers may break $4.4 million if there are no further geopolitical issues over the weekend.
- Aframax Market: This sector saw very little change, avoiding the usual topsy-turvy moves. Both owners and charterers were content with WS130 levels across the Mediterranean, with variations depending on the specific routes. A spate of fixing did tighten the list, giving owners some hope. However, the suffering Suezmax sector in the Atlantic led to “cargo cannibalization” (smaller Aframaxes taking cargoes usually carried by larger Suezmaxes), pressuring Aframax rates downwards. With no external support, the market remained range-bound. The current political disruption in the Middle East is the new “fly in the ointment,” prompting owners to hold back in hopes of better rates next week.
US Gulf/Latin America:
- VLCC Export Market: The US Gulf (USG) VLCC export market seems to have found its floor and remained there for most of the week. A positive sign was the return of long-haul activity to the Far East. However, charterers still hold the advantage due to a growing tonnage list. Owners are hoping for another active week to kickstart a recovery.
- Brazil Cargoes: A steady flow of Brazil cargoes was observed, with rates following the softer tone seen in West Africa. Any improvement will be reliant on increased activity in other areas.
- Current call for USG/China: $6.1 million
- Current call for Brazil/China: WS51
North Sea:
- Aframax Market: The North Sea market failed to ignite, with rates consistently trading in the mid-low WS120s. The falling rates in the States market have deterred potential ballasters, keeping the tonnage list well-stocked. Rates are likely to trade sideways for now, as fresh enquiries remain slow.
Clean Products
The product tanker market, particularly in the East, is currently in a state of suspense following geopolitical events in the Middle East. While some sectors saw corrections prior to the recent escalation, the overall sentiment is now dominated by uncertainty and a cautious approach from owners.
East – Middle East Gulf (AG):
- LR2 Market (Long Range 2): After a very active week that led to a negative correction as tonnage cleared, the recent overnight attack on Iran has halted further activity. Owners are now holding back, assessing the situation before committing their vessels.
- Current rates are TC1 (AG/Japan) at 75 x WS115 and AG/UKC at $3.4 million.
- Sentiment suggests these rates are at or very close to the floor.
- Despite ships being in the window, there might be only slight movement.
- LR1 Market (Long Range 1): LR1s have been ticking along in the background, overshadowed by the larger LR2s offering better value.
- TC5 (AG/Japan) needs a true test and has the potential for a large spread depending on charterer requirements, currently assessed at 55 x WS140.
- The West route is untested and expected to see a negative correction to around $2.7 million levels on the next fixture.
- A slow and calculated start to the next week is anticipated, with all eyes on the next 48 hours for geopolitical developments.
- MR Market (Medium Range): A week of small gains and promise in the AG MR market has been interrupted by recent geopolitical events, causing a slip in TC12 and XAG levels. A few cargoes are still seeking cover, and a steady finish to rates is expected. The full effect of the Israeli strikes on Iran is still unclear, and the weekend is expected to provide better insight by Monday.
UK Continent:
- MR Atlantic Market: General sentiment has slowed, and rates have corrected downwards as cargo flow dwindled. Volatility continued with some fixing and failing, but overall, rates softened, a trend expected to continue. A potential bearish factor is the price cap being lowered to $45, which could drive tonnage back into non-price cap trades, making the Atlantic dynamic very sensitive with various push and pull factors.
- Handy Sector (Handysize): This sector saw limited fixing but also limited tonnage, leading to steady rates. The general range for fixing has been 30 x WS155-160. Tonnage tightened as the week progressed, and with a couple of tricky stems still to cover, there’s potential for further gains. However, owners must be wary of larger MRs becoming equally competitive for short runs, which could cap Handy rates.
Mediterranean:
- MR Med Market: This market was divided this week.
- The West Mediterranean was driven by Sines and grade sensitivity, reaching highs of 37 x WS145 Trans-Atlantic (TA).
- In contrast, the East Mediterranean was somewhat lackluster, with owners taking lower rates (around 37 x WS132.5) to reposition into the Atlantic basin.
- The impact of Middle East events on the Med market is a significant question. Without these events, the Med would generally appear bearish, but the ripple effects from the East could introduce multiple unpredictable factors, making it a developing situation with an unknown outcome.
- Handy Med Sector: A stagnated week for Handy owners, with TC6 (Cross Med) remaining steady at 30 x WS130. Initial hopes for upward momentum from grade-sensitive stems did not materialize, as the tonnage list was well-stocked, favoring charterers. Owners hope for better fixture numbers and a tighter tonnage list next week. Geopolitical developments in the AG region are seen as a potential catalyst for positive movement, with 30 x WS130 seemingly forming a floor for rates. Any rally will depend on steady inquiry and effective reduction of available tonnage.
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Source: Gibsons
