Declines in dirty tanker voyage count over the last two months can be attributed to more than just the seasonal summer lull, according to Breakwave Advisors.
Main Drivers
The main driver of declining voyage counts is fewer VLCC departures to Asia from both the Middle East and the Americas (US Gulf and South America East Coast)
- Reduced VLCC departures to Asia are predominantly due to weak demand from China
- In August, exports from Saudi Arabia and the US declined m-o-m, with US exports reaching their lowest volume since Jan-23 (read more here)
Average voyage mileage for dirty tankers has declined about 5.5% y-o-y, mostly because of reduced VLCC voyages to Asia
- Additionally, Russian crude exports (excl. Kazakh grades) were observed at their lowest levels in nine months, leading to reductions in Aframax voyages from Russia.
Though tonne-miles are slightly lower y-o-y, they are still exceptionally high compared to historical averages due to the Russian reshuffling effect
Middle East VLCC Loadings
Middle East VLCC loadings carrying middle distillates reached a record high in August with 5 loadings in total
- Overall, there were 6 VLCCs and 2 Suezmax tankers cleaning up for August, down from the 15 vessels (4 VLCCs and 11 Suezmaxes) cleaned up in July
LR voyages remain at similar levels to the previous summer months because of this trend
- As a result, LR freight rates continue to hover around 2024 lows for East-to-West flows reaching around 45-50 $/t
- This provides a spread of around 20 $/t for Suezmax/LRs and 30$/t for VLCC/LRs
As a portion of tankers return to the dirty trade (especially for Suezmaxes) this could pave the way for more clean-ups
- 3 VLCC loadings are already expected in September
- Whether this trend will remain ultimately hinges on whether crude tanker rates can pick up after the summer lull
Aframax Supply Drops
Ballast Aframaxes flee the East Med as crude loadings decline nearly 300kbd w-o-w for the w/c 26th August 2024 due to an ongoing outage in Libya
- The sharp decline in loadings has resulted in 31 ballast Aframaxes in the East Med as of 3rd Sept; a 35% decline w-o-w
- Due to the outage, TD19, (cross-med) has declined to a 12-month low, observed at $10.46/ton as of 3rd September
- The decline is driven by the fall in freight demand in the area, resulting in TD19 now 60% below the 2024 average
Due to decreasing optionality in Europe/Med, vessels discharging in NW Europe are increasingly ballasting towards PADD 3, where the number of ballast Aframaxes as of 3rd September has increased by 100% compared to two weeks earlier
- This increase could pressure already lackluster TD25 rates
If the Libya dispute is resolved and crude loadings continue as normal, we could observe a rebound in TD19 rates, which could induce a rebound in blasters to satisfy the upcoming requirements
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Source: Breakwave Advisors
