Suezmax and Very Large Crude Carrier rates for voyages loading in West Africa have tumbled since hitting multi-decade highs during the first week of the war in the Middle East, with sources pointing to increased owner interest in Atlantic cargoes following the effective closure of the Strait of Hormuz.
Platts, part of S&P Global Energy, assessed freight on the 130,000 metric ton WAF-UK/Continent route at w270 on March 10, down 28% from a peak of w375 reached on March 4. VLCC rates have also fallen sharply, with Platts assessing freight on the 260,000-mt WAF-Far East route at w225, down 20% from its wartime peak of w280.
Following the outbreak of the conflict, crude tanker rates for voyages loading both west and east of Suez had spiked to hit their highest levels since Platts records began in May 2002, as charterers scrambled to secure supplies and owners capitalized on the prevailing atmosphere of uncertainty.
However, with 20 million b/d of Persian Gulf crude exports taken out of the market, vessels in position to load in the East suddenly found themselves stripped of employment opportunities, and many of them have now begun ballasting to the Atlantic, where trade flows have remained undisrupted.
“Paper is trading straight downward, the hype of the war is over, and vessels from the East will look to ballast to the West, so you’ll have oversupply,” a London-based Suezmax broker said. “Owners don’t think the high rates will last.”
Rates nevertheless remain well above historical averages, with sources citing the diversion of some Persian Gulf volumes to the Red Sea port of Yanbu, the shut-in of a significant portion of the VLCC and Suezmax fleets in the Red Sea, and the ongoing imperative for Asian importers to stockpile crude in the event that the Middle East conflict drags on.
A Europe-based Suezmax broker said the current downward trend was likely to stabilize soon, due to “several cargoes now being talked about from the US Gulf and Caribbean,” but he noted that a resolution to the Middle East conflict could trigger a significant fall in rates.
While the tonnage supply for voyages loading in the Atlantic has expanded in recent days, the Black Sea and Eastern Mediterranean are currently experiencing a relative shortage of free-of-cargo vessels, with sources reporting that Russian security services have been increasing the stringency of their checks for weapons and munitions on board vessels loading at Black Sea ports. According to a second London-based Suezmax broker, this has slowed the recycling of the vessel supply for voyages from the Caspian Pipeline Consortium terminal in Novorossiisk, therefore providing support to Suezmax rates in the Black Sea and across the Mediterranean and West Africa.
“I am bearish [for WAF], as there are still a load of eastern ballasters to chew through, although I think there is a floor, with w350 repeated from CPC, which is overvalued, but it provides a floor, plus the USG is busy.”
Source: Platts
