For decades, global refining capacity has generally been on an upward trajectory, with declines being rare and typically linked to major disruptions like the COVID-19 pandemic. This was largely driven by robust global oil demand growth.
Crude Oil
East
VLCC (Very Large Crude Carrier) AG Market: The AG (Arabian Gulf) VLCC market is currently facing significant headwinds, with rates plummeting to their lowest levels since January. A slow pace from charterers in the 3rd decade of the month has pressured owners into accepting rates below previous fixtures to secure employment. The recent Eid holidays are likely to further exacerbate this slowdown. Owners are hoping a bottom has been found, but the coming week is expected to remain challenging. Current assessments for AG/China are WS45 and AG/US Gulf are WS25.
Suezmax AG Market: It was a relatively quiet week in the AG Suezmax market, with limited reported activity. However, ships were discreetly picked off throughout the week. Rates remain stable around 140 x WS45 via C/C. Rates for voyages to the East have also held firm around the 130 x WS95 mark. The slightly firmer sentiment in the West Atlantic has helped by drawing some ships away from the AG list, fixed ahead from West Africa.
Asian Aframaxes: Mid-month requirements in Asian Aframaxes were quickly covered, trimming the front end of the tonnage list. However, this was not enough to significantly boost rates. Rates ex-Australia also felt depressed, with a reported fixture to the Far East breaking below WS100. Sentiment is on the softer side despite some off-market activity and a few outstanding stems. Owners, however, remain optimistic about more second-decade cargoes emerging. Rates are expected to trend sideways, with Indo/Australia assessed at 80 x WS105.
West Africa
VLCC WAF Market: The West Africa (WAF) VLCC market remained very quiet this week, with minimal reported inquiry or concluded fixtures. While rates are under pressure, the decline is not as severe as in the AG. Owners urgently need to see July stems materialize soon to prevent further rate decreases. Current demand for WAF crudes to the East remains low, and inquiry to the UK Continent was sparse. WAF/East is currently assessed in the region of WS49.
Suezmax West Africa: Suezmax rates in West Africa have firmed slightly throughout the week. However, a slowdown in inquiry towards the end of the week has softened sentiment somewhat. It is anticipated that charterers will attempt to break WS90 for TD20 (Nigeria/UK Continent) in early trading next week, with a likely success.
Mediterranean
Suezmax Mediterranean: The TD6 (CPC/Augusta) route for Suezmaxes is relatively steady, but there’s a marginally softer feel in the market. Charterers are likely to succeed in chipping a few points off last-done rates, possibly to around WS97.5. That said, the Aframax market in the region has firmed, potentially leading to some of the Suezmax tonnage list being trimmed via part-cargoes (smaller portions of cargo that can be carried by Aframaxes). Rates for Libya to Ningbo are steady, with next-done levels expected around $4.7 million.
Mediterranean Aframax Sector: The Mediterranean Aframax sector experienced a “rinse and repeat” week, with rates rebounding after a previous decline. Following stirrings in the US market last Friday, owners were eager to regain lost points at the start of this week. Charterers who delayed fixing cargoes until Monday faced difficulties. Inquiries for later dates further fueled the upward movement. Ceyhan freight rates moved rapidly from WS120 levels to WS130, and Libya loaders faced numbers in the WS140s to cover shorter flat rates. CPC levels were once more concluded in the mid-WS150s, after which the frenetic activity subsided. The tonnage list is currently thin, but given that many cargoes have fixed far forward, this doesn’t necessarily indicate a precarious position for charterers. The market is balanced, and with other vessel sizes also showing signs of fatigue, owners will be pleased to reinforce these rates if possible next week.
US Gulf/Latin America
VLCC US Gulf/Latin America: The US Gulf export market has finally seen a resurgence in activity after a period of inactivity. However, for VLCC owners, the significant build-up of available tonnage in the region has led to a sharp decline in rates for both East and UK Continent destinations. Hopes that buoyant activity in smaller vessel classes would translate to a pickup in VLCC demand have not materialized, and sentiment remains very soft. Brazil, on the other hand, enjoyed a very active week, and while rates are slightly softer, there is more optimism here due to continued high demand, especially to the Far East. Current assessments are USG/China at $6.2 million and Brazil/China at WS48.
Local Aframaxes (US Gulf/Latin America): Local Aframax rates began the week strongly, climbing to WS185, though this rate ultimately failed. The highest paid rate was WS175. The market now feels softer as inquiry has slowed, and VLCCs are reaching new lows, with $6.2 million to the East and $2.3 million to the UKC recently done.
North Sea
Aframax North Sea: It was a slow week for Aframaxes in the North Sea, partially due to the Nor Shipping event. However, this had little impact as the market continues to lack inspiration. Several ballasters have opted to head to the Mediterranean and Trans-Atlantic routes, where returns are considerably more favorable compared to local rates. The Cross-Continent (XCont) route still sits at WS122.5, with little to suggest a change in the immediate future.
Clean Products
East
LR2s (Long Range 2 Tankers): The LR2 market experienced a quiet end to the week, primarily due to public holidays across the Middle East. Activity has been consistently subdued, and a negative correction is anticipated next week as the tonnage list builds and owners are forced to compete for available stems. Current rates for TC1 (75kmt Middle East Gulf to Japan) sit at WS135 and for UKC (Middle East Gulf to UK Continent) at $3.75 million, both of which are expected to be tested downwards.
LR1s (Long Range 1 Tankers): The LR1s saw slightly more activity than their larger counterparts, but this did not translate into significant gains as a good proportion of deals failed or went on owners’ own program tonnage. Rates for TC5 (55kmt Middle East Gulf to Japan) are at WS150-155, and to the West (Middle East Gulf to UK Continent) are around the $3.0 million mark. Owners for both LR sizes are hoping for a surge in cargo inquiries come Monday.
MRs (Medium Range Tankers) in the Middle East: Overall, it was an active week for MRs in the Middle East, with a large influx of cargoes appearing in the first few days. However, due to a well-supplied tonnage list from the previous week, rates have taken a hit. TC17 (35kmt Middle East Gulf to East Africa) is down at WS185, and TC12 (35kmt Middle East Gulf to Japan) is at WS145. While the list has tightened slightly at the time of writing, further activity early next week will be crucial for rates to see a bounce back.
UK Continent
MR (Medium Range Tankers): MR rates in the UK Continent saw continued volatility. They hit a well-tested floor of 37 x WS115 for Trans-Atlantic (TA) on an LC (long clean) methanol boat this week, only to rebound to 37 x WS140 TA on an LC base oil boat. This fluctuation has largely been driven by changes in Mediterranean rates, which have altered the shape of the tonnage list in favor of the Med, leaving the North constrained for prompt tonnage. The Atlantic tonnage displacement factor continues to play out, with different areas driving the market at different times. The outlook remains rangebound, with the next significant spike likely dependent on a storm-related event.
Handy Tankers: Handy owners’ momentum quickly fizzled out at the start of the week, primarily due to the softening seen in the MR market. With TC2 (37kmt ARA/US-Atlantic coast) trading at 37 x WS120, TC23 (30kmt Cross UK-Continent) had to correct down to 30 x WS160 to avoid larger units scooping up 30kmt clips. The market appears to have reached its bottom (supported by a bounce back on TC2), and the fixing window is now stretching to 15-17 days out. While a few units on the front end of the list remain uncertain, the weekend break is welcomed, with hopes for firmer itineraries on Monday.
Mediterranean
Suezmaxes (Naphtha-suitable ships): Owners with naphtha-suitable Suezmax ships in the Mediterranean held firm this week, achieving 37 x WS150 TA. This grade sensitivity continues to be a key rebound driver for both the UKC and Med markets, as the actual workable fleet for naphtha movements is minimal. Rates going forward are expected to remain somewhat range-bound, similar to the UKC, bouncing between WS125-150 levels. This trend is likely to persist given current cargo volumes and the performance of other regions. While the Med can become quiet in the summer, it’s not at that stage yet.
Handy Tankers: It was a bleak week for Handies in the Mediterranean, with rates plummeting from 30 x WS180 at the open to 30 x WS135. Further softening is highly likely as the tonnage list remains long, with ample coverage for both prompt and standard fixing windows, fueling continued downward pressure. Despite fixing activity throughout the week, it was insufficient to tighten the market. Owners are hopeful for vessel subjects today and a small clear-out of tonnage, but charterers are expected to maintain their momentum into next week, with rates remaining under pressure until a floor is found.
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Source: Gibsons
