VLCC Market Remains Steady, Suezmax Firm in Near Term

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The VLCC (Very Large Crude Carrier) market is experiencing a somewhat slow and steady pace, with freight rates fluctuating slightly around previously established levels for cargoes traveling from the Middle East Gulf (MEG) to the East, reports Fearnleys. 

VLCC

The current freight market situation is as follows: 

  • US Gulf (USG):
    • The USG market is strong, with a tightening position list, indicating high demand.
    • This suggests that ship owners are having a perfect position when negotiating rates.
  • West Africa and Brazil:
    • Charterers dealing with West Africa and Brazil have more flexibility due to a more balanced tonnage supply, which is closely tied to the Middle East Gulf (MEG).
    • This indicates that charterers are slightly better positioned than those looking for vessels in the USG.
  • Overall Outlook:
    • The market is described as “steady as she goes,” suggesting a period of stability, albeit with the USG market showing greater strength.

Suezmax

Suezmax market outlook:

  • Near-Term Outlook:
    • The market is firm in the very near term, driven by the strong U.S. Gulf (USG) market and support from Aframax rates on both sides of the Atlantic.
    • USG rates have surged to 145kt x 92.5, with Aframax rates also increasing.
    • Limited safe fuel oil cargo (FOC) options for USG/Transatlantic (TA) runs are contributing to rate increases.
    • This situation creates a $6,000 per day price reporting (PDPR) differential compared to the last done rate of 97.5 for a Rotterdam opening, justifying owners’ expectations to break the WS 100 level.
  • Factors Muddying the Waters Next Week:
    • While Transatlantic ballasting remains more profitable for non-Chinese-built UK Continent (UKC)-Gibraltar (GIB)-West Mediterranean openings, charterers have been actively securing West Africa/South Africa openings, which were previously abundant.
    • Some Eastern ballasters bound for the Congo (COGH) have also been taken from the forward window.
    • These factors could potentially dampen the market’s upward momentum.
    • The long-term impact on the USG market is also a concern.
    • The Supply-side dynamic could ease after the weekend.

Aframax

 Aframax market situation:

  • North Sea:
    • The market has been relatively quiet over the past week, with activity shifting into the first five days of April.
    • The strengthening U.S. and Mediterranean markets are expected to put upward pressure on North Sea rates and reduce available tonnage, as vessels are drawn to more profitable regions.
    • If consistent activity picks up in the North Sea, rates are likely to increase.
  • Mediterranean:
    • April cargoes are being quickly booked, leading to a surge in rates due to increased activity.
    • Employed tonnage is reducing available vessel lists.
    • With support from the U.S. Gulf (USG) market, charterers will likely find it difficult to secure ballasters to stem rate increases.
    • Owners are optimistic about the market.
    • Rates are at parity with Suezmaxes, which could influence the market dynamics.
    • CPC output is low, and therefore CPC rates require testing to see where the market is.

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Source: Fearnleys