The VLCC market experienced a significant downturn this week following a period of strong gains. Despite initial strong offers from Vietnamese charterers, according to Fearnleys.
VLCC
The MEG/China route should command higher rates, but past attempts to establish this have rarely succeeded. The emergence of oil companies and traders willing to relet cargo at potentially lower rates has significantly impacted market sentiment. While oil prices still favor Atlantic/East routes, the overall market sentiment has deteriorated.
Suezmax
The week began with headline deals, including a TD20 fixture at 78.75, although this involved a vessel with an expiring SIRE certificate. A significant downward correction was observed in eastbound routes, particularly due to a vessel on short-term time charter at a rate significantly below the voyage earnings.
West African crude exports appear to be declining, with limited volume for early February and a lack of VLCC fixtures. However, fundamentals across the Atlantic remain strong, with USG/TA runs finally achieving TCE equilibrium. With VLCCs pricing themselves out of these voyages, there is hope that LIZA and USG BBLS will be transported on Suezmaxes.
In the Mediterranean, Aframaxes have been fixing at rates above the TD6 level, with Suezmaxes subsequently matching these rates. Crossover opportunities are expected to continue in both the Mediterranean and North Sea.
Aframax
The availability of vessels for North Sea voyages in January is limited. Activity has also been restricted due to the natural window shifting into February. Freight levels have remained relatively stable despite these limitations.
Given the limited activity in the US Gulf, vessels are ballasting to the Mediterranean, where market activity has shown more promise.
Fundamentals in the Mediterranean/Black Sea do not indicate a significant shift in rates. However, sentiment has kept rates steady. Suezmaxes are present in the region and have the potential to interfere with trades moving forward, as their equivalent levels are comparable. While there is potential for rate increases, there are no other immediate pressure points.
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Source: Fearnleys
