A significant portion of US crude oil imports from Canada is consumed by refiners in the US midcontinent region, which are specifically designed to process heavy crude. Due to pipeline constraints, these refiners have limited options for alternative crude sources. The imposition of tariffs on Canadian crude could force these refiners to either absorb the additional costs, pass them on to consumers, or reduce their refining operations. Coastal refineries, however, may explore alternative import routes to mitigate the impact of tariffs, reports Gibsons.
Crude Oil
East
VLCC rates have plummeted in the AG, touching on yearly lows towards the end of the week. This decline was exacerbated by a large surplus of available tonnage and reduced demand, especially for the current 2nd decade December loading window. Owners will be hoping that we have reached the bottom of the current downward cycle but the outlook for next week remains uncertain and potential for recovery looks to be some way off. Today we are calling AG/China in the region of WS45 and 280 AG/USG is fetching WS28 level via the Cape.
Suezmax tonnage availability in the AG has continued to be turned over by a steady Indian enquiry; however, this has little impact in the region and only trimmed the top of the position lists. With little on the horizon to shake off the weak sentiment and expected tonnage replenishment, next week fixing levels are likely to crabwalk sideways. For now Basrah/Med run via Cape is paying 140 x WS57.5 and an east run is at 130 x WS90 level.
It has been an unusual week for Aframaxes as rates remain under pressure despite the front end of the list tightening. SE Asia is showing little signs of bouncing back, resulting in ships ballasting away from the region to pick up cargos ex AG, which in turn is dampening Owners’ efforts to nudge TD8 upwards. The Indo region ends the week with a healthy list as TD14 prints at 80 x WS122.25. 1st decade cargoes were quick to be covered but were insufficient to lift rates. An Aframax quote into Taiwan saw the market accept current levels as it concluded similar to last done rates. Sentiment remains on the softer side and expect it to roll over to next week.
West Africa
The VLCC market here performed better than adjacent zones as activity levels for last decade increased. Yet, rates remain under pressure as eastern ballasters move towards the Atlantic to escape the declining east market. Owners have shown some resistance here but with USG quiet, its hard to justify an upturn next week as fundamentals currently favour the Charterers’ side of the fence. Off natural dates we estimate that on today’s market a 260 WAF/China run would pay around WS52 level.
This week started off following the theme of previous weeks, being presented with a seemingly long tonnage list in West Africa. However, this corrected fairly quickly in the week, with a mix of fresh inquiry and off-market fixing trimming down early positions. This resulted in Owners making gradual gains, with TD20 trading firm around WS85 levels.
Mediterranean
Suezmaxes in the Med experienced what has been an active week, where rates have been comparable to some Aframax runs allowing some Owners to turn over tonnage. This has been aided by lengthening Turkish Strait transit times, which has kicked some units further down the positions lists. As a result, TD6 run is looking to trade closer to a three-figure mark, but it will take a fresh round of inquiry early next week to bolster Owners’ ideas here.
During the week it has become evident that CPC freight rates for Aframaxes have become disconnected from XMed runs. As Charterers had to reach further and further forward to anticipate Turkish strait delays, so did tonnage willing to call CPC dry up. Rates moved up from the WS150s into the mid WS160s and the only reason this did not become much more was the presence of Suezmaxes more than eager to absorb part cargo availability. Meanwhile, in the Med most vanilla voyages settled at WS145 with enough tonnage over 15 years of age being willing and ready to do last-done levels, Fixing dates have now extended considerably and so the beginning of next week will be key with a need for some replacements, if owners are to kick on from here.
US Gulf/Latin America
VLCCs experienced a slow week for USG export which is not too surprising given Thanksgiving week. Inquiry levels remain frustratingly weak as Owners have not been able to lift rates out of its current slump. There should be more activity next week as Charterers are expected to start working their January programme but it will take a big effort to lift the market, while adjacent regions remain weak therefore hitting sentiment. Brazil exports enjoyed a busier week and Owners managed to stabilize rates after the initial drop at the start of the week. Today we expect a USG/China cargo to pay in the region of $7.3M and a Brazil/China run is around the WS50 level.
North Sea
The North Sea has proved disappointing from an Owner’s perspective, with cargo volumes remaining thin and bad weather not serious enough to disrupt shipping schedules. In addition to this, given the Med and States markets have not kicked on, there has been less leverage in Owners’ favor when it came to trading the local shores. Rates for vanilla runs remain in the mid WS120s in most cases, with some small increases on offer in tighter positions, but in the main ,the going has been and will remain flat into the next days.
Clean Products
East
The activity on the LR2s continues to tick along nicely and as such the list slowly thinning out and Owners have been able to push gently on last-done levels. TC1 on subs at 75 x WS120; however, understandably Owners have WS130 in their sights. Jet heading west has been busier and as the compromised units are cleared off, the list rates have reacted accordingly. Assess $3.5-3.6M levels for now. There has been a more consistent flow of cargoes for the LR1s this week and as such we are slowly chipping away at the list. Still more work to be done but certainly a move in the right direction. TC5 holding flat at 55 x WS110 and west is in need of a test, but for now assess $2.6M level at the close of the week.
MRs east of Suez have sat poised most of this week as on Monday we saw a flurry of activity clip away a handful of early units and reports of a WS200 fixture over last weekend confirmed the early window had tightened up. Fast forward to midweek and sentiment remained steady but with very little cargo flow, we saw a stand-off on levels. East and west have remained largely untested, with most activity supporting TC17 run. We close the week with WS180 repeated now. Expect to see Owners push here but Monday will need to show some early promise in terms of stems to see any real stimulus for a push.
Mediterranean
It’s been an up & down week for the Handies here in the Mediterranean, which has once again shown how volatile this market can be. 30 x WS225 was the call for XMed on Monday morning but, with poor weather across the Med throwing itineraries up in the air combined with a dump of cargoes into the market, rates soon skyrocketed. By Monday COB XMed was at the 30 x WS282.5 mark and with the bad weather continuing into midweek, rates hit the heights of 30 x WS300. However, cargo enquiry soon dried up and a quiet few days here have seen the list start to replenish. As a result, rates have been coming off ever since as dates extended into the mid-end December and we now see 30 x WS220 back on subs for XMed. Heading into the weekend, there isn’t a great deal left to cover, so expect the pressure to continue.
In the Med MR sector, there has been an active week of undercover fixing. Med/TA began the week at the 37 x WS145 mark, with WAF trading at its recent standard WS30-point premium. On the surface, cargo enquiry seemed to be sluggish but thanks to ships being taken out under the radar, the tonnage list has grown ever-tighter. This was highlighted when we saw 37 x WS205 achieved for a Med/UKC naphtha run on Wednesday evening, which has since heightened Owners’ ideas for vanilla runs. At the time of writing, no cargoes are outstanding but with the list tight, Owners will remain bullish into the weekend.
UK Continent
Not quite the week Owners had been expecting after the active end last Friday as Charterers seemed to turn the tap off and the market fizzled out. All hope of the pre-Thanksgiving rush slowly faded by mid-week, with only a light dusting to inquiry seen. The few stems that did appear managed to chip away at last-done rates, with TC2 now back down around 37 x WS130 mark. WAF also has been slow and with Handies largely being a preferred option for XUKC, we saw limited tonnage turnover. One positive development for Owners has been an increase in Russian activities this week, which has cleared certain tonnage off our list. Yet, with London Christmas party week around the corner, we can expect this market to remain slow on quoted stems.
It has been a lackluster week for Handies plying their trade in the North, with cargo inquiry being drip-fed into.
Dirty Products
Handy
It’s been a week to forget for owners as enquiry in the North has struggled to surface allowing for the position list to become well stocked for natural tonnage. The little activity we saw brought a softening in rates to 30 x WS212.5. As we look ahead to next week, we think levels are likely to come off further, given the options available, particularly as owners positioned WMed are willing to ballast.
Levels in the Med have remained relatively steady given the general lack of activity. A mixture of replacements and reloads has left the market in need of a fresh test for a ‘vanilla’ XMed cargo. For now, the list offers options for Charterers. With more tonnage expected to open over the weekend, Owners will be hoping for a fast start to the week’s proceedings. However, Christmas party week in London could work in Charterers’ favour.
MR
A quiet week across both markets as far as full stem enquiry is concerned, although Owners have found some employment via the usual part cargoes. Looking ahead to next week in the North, options are available for Charterers. If Handy cargoes continue to remain elusive, this could lead to a test down should enquiry surface. In the Med, the equivalent of 45 x WS115 has been reported, applying downward pressure on levels and rate ideas. An active start to the week is needed to stop rates and sentiment sliding here.
Panamax
Panamaxes in Europe have seen a more active week, with a couple of deals to report. Despite this activity, levels have softened from WS125 last week to 55 x WS110 fixed this week. Owners look to head back to the USG in the hope of a stronger end to the year. We feel this, mixed with available units, is the main driver in the softening of levels. Over in the USG, the market stayed relatively steady, whilst surrounding markets softened, mainly due to under-the-radar activity keeping the rest of the market in the dark and Charterers reaching forward to cover before Thanksgiving.
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Source: Gibsons
