The demand for Aframaxes and Suezmaxes transporting crude oil from Russia to China is anticipated to remain robust this month. This is due to the possibility of disruptions in Iranian oil supplies, which may lead Chinese refiners to increase their interest in Russian Urals and Arctic crude, according to Breakwave Advisors.
Recent Uptick
LR transits via the Cape of Good Hope declined precipitously in Jul/Aug as employment on the MEG-to-Europe middle distillate route was lost to cleaned-up supertankers, and fewer LR ballasters returned to the MEG after a Europe discharge
However, over the past few weeks, LR transits via the Cape of Good Hope have climbed upwards
➔ A softly open arb for E-W diesel flows (Argus) contributed to an increase in LR voyages MEG-to-Europe at the same time as a small uptick in ballasters heading to the Middle East
➔ Additionally, favourable arbitrage economics for Med naphtha to Asia (Argus) have seen Med-to-Asia transits around COGH increase
Questions around the sustainability of this recent uptick in LR Cape of Good Hope voyages remain
➔ Supertanker clean-ups have slowed in October, but closed arbs will likely limit E-W middle distillate departures
➔ Asia’s naphtha demand may have peaked as reformer and ethylene cracker margins are under pressure
Red Sea Impact
As we approach the one-year mark since the beginning of the Red Sea attacks, crude tanker rates have remained relatively unaffected by the events, particularly when compared to the clean tanker segment
➔ This stability can be attributed to shifting employment patterns for Suezmax vessels.
Following the Russian invasion and the EU oil ban on Russia, Suezmax tankers increasingly found employment routes from the Atlantic Basin and the Middle East, rather than the Baltic
➔ However, after the Red Sea development, partly due to fear of attacks for transiting the Bab-el-Mandeb, and partly due to the surge in distances to reach Europe, the majority of Suezmaxes from the Middle East pivoted towards the Atlantic Basin
➔ As a result, arrivals in September for Suezmax voyages operating on the MEG-to-Europe route, reached the lowest point since at least Jan 2022
➔ Projections for October suggest a likely increase in arrivals, as a m-o-m rise in September departures combined with stronger market enquiries has maintained TD23 rates at four-month highs
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Source: Breakwave Advisors
