As we are moving to load dates away from the summer months, VLCC Middle East-to-East Asia (TD3C) freight rates have picked up from 2024 lows by 30% on a w-o-w basis, reports Break Wave Advisors.
TD3C Recent Spike
This increase comes on the back of renewed charterer interest in the market to fulfill requirements for early September loading dates
➔ TD3C followed a similar trajectory at the midpoint of last month
However, current availability figures suggest that this time freight rates might not cool off as quickly as a month ago
➔ Fixing windows for both blasters heading to the Middle East Gulf and for laden vessels expected to discharge and return to the Gulf are lower than July levels
There is likely to be a mixed tanker demand picture in the medium-term
➔ Decreasing seasonal domestic demand in the MEG plus the unwinding of OPEC+ voluntary cuts will support more exports
➔ China’s crude demand is seasonally stronger Sep-Dec, but this year’s peak will likely fall below historical norms
➔ Plus, Saudi OSP cuts offered in August were not continued
MR Freight Rates Increased
MR freight rates in APAC have increased due to high utilization for voyages within NE Asia and to a lesser extent NE Asia-to-SE Asia
While CPP exports from China remain muted, MR demand side-strength in NE Asia comes from heavy maintenance (planned and unplanned) at Japan’s refineries
➔ As a result, Japan’s CPP imports from South Korea have risen this month (Aug days 1-19)
The market anticipates the granting of Chinese CPP export quotas in September, but this is unconfirmed
➔ If granted, poor refining margins in China necessitate that the quota volumes will need to be higher than last year, and we expect that most of the quota volume granted will be for jet fuel that is likely to stay within the region
➔ Otherwise smaller additional volumes of diesel are expected
➔ Even if supplies mostly stay in the region, this will stimulate the currently lackluster MR demand out of China
VLCC Rates Recover
VLCC freight rates on the US Gulf to China route (TD22) have recovered slightly after reaching 15-month lows last week
➔ Likely some of the increase in TD22 freight rates is the global effect from strength on TD3C (see above slide)
This slight increase in TD22 appears to have prompted an increase in VLCCs ballasting towards the Gulf of Mexico
➔ Ballast VLCCs were down to their lowest numbers in six months as demand for US crude remained scarce in waterborne markets
High VLCC fixture counts in the US Gulf for August loadings and current fixing for September loading dates point to increased loadings
➔ However, US Gulf Coast crude exports are declining so far this month (Aug days 1-20), and it remains to be seen how many of these fixtures materialise
Until then, factors supporting this rally in VLCC freight remain sparse and not very promising
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Source: Breakwaveadvisors
