The crude oil tanker market is experiencing mixed signals across different vessel classes. While VLCC rates continue to struggle, Suezmaxes are seeing a positive shift in the West, and Aframax rates are expected to firm in the North Sea and Mediterranean.
VLCC Market: Summer Slump Persists
VLCC freight rates have continued their downward slide over the past week and are yet to find a stable floor. The market is currently in a “summer slump,” with owners seemingly focused on simply navigating through this period. Rates have fallen to a level where shorter voyages are becoming more attractive. Owners are showing reluctance to commit to longer voyages and might soon demand small premiums for such commitments. However, the current lack of sufficient cargo volume prevents any upward pressure on rates.
Suezmax Market: Turning Tides in the West
The Suezmax market in the West is showing signs of a turnaround.
- Tonnage Clearout: Since Monday, there has been a significant reduction in available tonnage, with “Free on Call” (FOC) availabilities decreasing and minimal supplementary vessels appearing over the weekend.
- Increased Charterer Activity: Charterers, particularly those outside the CPC (Caspian Pipeline Consortium) region, have already begun actively seeking vessels. This increased demand, coupled with dwindling supply, suggests that further downside in rates is unlikely for West Africa too.
- US Gulf Influence: The sensitivity in the Western Suezmax market is compounded by a strong US Gulf (USG) market, which continues to draw vessels from the UK/Continent/Mediterranean (UKCM) region due to limited local availability and persistent delays on the US Atlantic Coast (USAC).
In the East, despite a decent level of inquiry and some erosion of the tonnage list, positive momentum for Suezmax rates is being capped as long as VLCC rates remain low (mid-WS 40s).
Aframax Market: Firming Up
Both the North Sea and Mediterranean Aframax markets are showing signs of strengthening.
- North Sea: Activity has been steady, with dates pushing towards the end of the first decade of the month. The firmer conditions in surrounding markets are expected to pull tonnage out of the North Sea in search of alternative business. This outflow of vessels will likely lead to tighter availability and upward pressure on North Sea Aframax rates.
- Mediterranean: The Mediterranean market has seen continued activity, though rates have been sideways in the early part of the week. While the front end of the tonnage list has shrunk, the fixing window for most ports is still late in the first decade or early in the second. The significant jump of 25 Worldscale points in the USG market since Monday is expected to draw ballast (empty vessels) from the West Mediterranean. This movement will further reduce tonnage availability in the Mediterranean, putting upward pressure on rates, similar to the anticipated firming in the North Sea.
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Source: Fearnleys
