The first week of September has shown weaker momentum for both dirty and clean freight market rates. Supply trends are expected to be a challenging factor in the coming days, with a notable increase in available vessels. In the MR clean segment, there has been a surprising upswing, pushing levels above the annual average. Meanwhile, VLCC Ras Tanura levels are nearing the annual average, suggesting potential shifts in market dynamics. It remains to be seen whether this trend in tonne-day growth, driven by increasing demand, will translate into higher freight market rates, reports Break Wave Advisors.
Freight Rates
In the oil market, concerns about crude oil demand persist. Pessimism is overshadowing efforts by the Organization of Petroleum Exporting Countries (OPEC) to stabilize prices. According to a report by ANZ Bank, OPEC+ is nearing an agreement to halt the phase-down of output cutbacks, offering temporary relief to markets. However, fears of weaker demand have resurfaced, pushing prices lower. Disappointing economic data and the Federal Reserve’s report of declining economic activity in the United States further exacerbated these concerns. Despite speculation about potential monetary policy easing, investor response remains subdued.
The sentiment in the dirty freight market appears weak in early September. Aframax cross-Mediterranean routes show softer momentum compared to August, and VLCC MEG-China freight rates fell to 45 WS, a 2% weekly decline, although they remain up 23% year-on-year. Suezmax freight rates from West Africa to continental Europe have stabilized around 75 WS, reflecting similar levels to late August but marking a 6% drop from the previous week. The Baltic-Mediterranean Suezmax route has also weakened, falling to 78 WS, down 18% for the month.
Aframax Mediterranean freight rates are around WS100, marking a 30% decline compared to last month. LR2 AG rates have also seen a steady decline since July, now hovering at WS117, down 22% for the month. Panamax Carib-to-USG rates have dropped to WS150, a 20% decline from a month ago.
Despite these declines, some MR rates have shown resilience. MR1 rates for shipments from the Baltic to the continent increased to WS160, a 3% weekly rise, although they are still 16% lower than last year. MR2 rates from the Continent to the USAC are around WS120, a 2% weekly increase but 40% lower year-on-year.
In terms of vessel supply, VLCC Ras Tanura ship count has increased to 74, matching the annual average and reflecting a 13-ship rise from four weeks ago. Suezmax vessels from West Africa are now at 57, nearing the annual average of 60. Aframax Med levels have surged by nearly 50% over the past two weeks, exceeding the annual average. Meanwhile, Aframax Baltic numbers have trended downwards, with current levels below the annual average.
Clean LR2 AG vessel activity saw an increase in early September, though still below the annual average. MR1 activity at Algeria’s Skikda surged to over 40 vessels, while MR2 activity in Amsterdam has been on a gradual rise, recently reaching 50 vessels—20 more than the annual average.
Dirty tonne-days have continued their August decline, with VLCC tonne-day growth weakening further. Suezmax tonne-days are showing signs of recovery, but are still below the annual average, while Aframax tonne-days are recording the lowest weekly percentage growth. Panamax and Clean MR tonne-days are both seeing continued declines in growth rates, with no immediate signs of upward momentum.
The freight market remains in a precarious position, with supply dynamics and economic concerns set to play a crucial role in shaping future trends. As the market reacts to these factors, both freight rates and economic stability are likely to experience significant fluctuations in the near term.
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Source: Break Wave Advisors
