W127.5 was logged MEG/China end of last week, and despite balanced position lists east and west of Suez VLCCs got a punch in the snout as W115 was logged for a MEG/China cargo yesterday on a trader relet, after which TD3C came in at W113 and change. A cargo being traded at the time of writing has seen punters firm at very low teens against low W100’s from the charterer.
VLCC
VLCC rates have recently seen a downward correction after a period of strength.
- Rate Movement: The rate for the key MEG/China route (TD3C) dropped from W127.5 to W115 on a trader relet, settling at W113 and change. Current trading suggests further rate pressure, with punters quoting low W110s against charterers’ low W100s.
- Market Outlook: Despite this profit-taking, the downside is expected to be capped. With an estimated 50 or more cargoes needing coverage in the late November window and a slowdown expected next week due to the Bahri get-together in Dubai, strong demand is anticipated when players return. Rates are projected to remain in three digits, resulting in daily earnings of USD 100k/day or more.
- Global Parity: Rates for West Africa and Brazil exports are closely mirroring the MEG, with W110 concluded for a TD15 run.
Suezmax
The Suezmax market is currently very bullish, particularly in the West.
- Western Tightness: The West is experiencing an extreme shortage of available tonnage, which is driving aggressive rate hikes from the US Gulf. Recent fixtures include USD 7.25 million on subs for USG/WCI and WS140 on subs for USG/UKCM, both significant increases.
- Bullish Fundamentals: Owners are expected to use these USG gains to push for similar increases in the TD20 (West Africa) route. Demand is set to accelerate as very little tonnage has been covered from West Africa or Guyana, and CPC December cargoes are entering the market. Seasonal weather changes are also expected to add volatility and potential delays, further supporting rates.
- Market Outlook: Although the recent cooling in the VLCC market may slightly affect sentiment in the MEG, a potential surge in demand ahead of the Bahri events next week could prevent losses or even trigger a rebound. The overall market is described as a “perfect storm” for owners approaching year-end.
Aframax
The Aframax market is experiencing minor downward adjustments but holds a firm underlying sentiment.
- North Sea: The local North Sea runs saw a small downward correction after a recent market quote put pressure on owners. With more vessels ballasting towards the US Gulf/East Coast Canada (USG/ECC) and the Mediterranean, rates are expected to hover around last-done levels.
- Mediterranean: Local Mediterranean runs also saw a small downward correction. Charterers are pushing for tight itineraries in hopes of securing replacement jobs. The tonnage list is balanced, but the scarcity of suitable candidates suggests a sideways market with a firm sentiment, dependent on specific cargo dates.
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Source: Fearnleys
