This week’s data underscores the declining trend in VLCC ballast speeds during the summer season, coinciding with a weakening trend in AG-China freight market rates throughout June. Since mid-May, there has been a noticeable strategy among industry players to reduce ballast speeds in the Arabian Gulf, possibly in response to market conditions.
As the summer season unfolds, a subdued sentiment grips the freight market, particularly evident in the VLCC MEG-China route. The number of vessels at Ras Tanura has increased approaching the end of June, yet the growth in dirty tonne days shows no signs of strengthening. Against the backdrop of a declining freight market, VLCC ballast speeds in the Arabian Gulf have decreased, indicating a cautious approach among operators. Looking ahead to the month’s end, market projections suggest a continuation of this trend, with supply dynamics playing a pivotal role in shaping crude oil freight rates.
The economic performance of China, a key player in global oil demand, remains under scrutiny. Weak signals from the Chinese economy have contributed to concerns about oil demand, exacerbated by a decline in China’s crude oil imports during the first five months of 2024 compared to the previous year. This trend underscores broader economic challenges, including a slowdown in sectors such as real estate, construction, and automobiles, which are crucial drivers of oil consumption. OPEC has maintained a relatively optimistic outlook for China’s oil demand growth this year compared to other organisations, reflecting varying degrees of optimism across industry forecasts. However, the overall slowdown in China’s oil demand growth highlights the complex interplay of economic factors influencing global energy markets.
SECTION 1/ FREIGHT
Market Rates (WS)
‘Dirty’ WS – Weaker
VLCC – Suezmax – Aframax
The end of the first half of June marked a definitive weakening trend in crude oil freight rates across several key routes. The Aframax Med route and VLCC AG-China experienced particularly notable declines, reflecting broader market dynamics influenced by factors such as fluctuating demand, geopolitical developments, and global economic conditions.
The VLCC MEG-China freight rates dropped to 50WS, marking a 30% increase compared to the rates observed in the same week of June last year.
Suezmax freight rates for shipments from West Africa to continental Europe have maintained stability at around 110 WS since the beginning of June, showing a consistent trend from the previous month. Meanwhile, rates on the Suez Baltic Med route have also remained steady at approximately 120 WS, reflecting a stable sentiment compared to the rates observed during the same week last year.
Aframax Mediterranean freight rates are hovering around WS150, marking a 26% decrease compared to the previous month. The rates suggest a continuing trend towards further declines, with the last peak observed at the end of week 22.
‘Product’ WS
LR2 Weaker
LR2 AG freight rates have maintained levels around WS200 for the past two weeks, which is approximately 50 points lower than rates observed in mid-May but still reflects a 70% increase compared to the same week last year.
LR1 Steady
Panamax Carib-to-USG rates sustained levels around WS 180 from mid May, currently standing 38% weaker than during a comparable week a year ago.
‘Clean’
MR Mixed
MR1 rates for shipments from the Baltic to the continent have risen to nearly 300 WS, showing a 40% increase compared to levels a year ago. Meanwhile, MR2 rates for shipments from the continent to the USAC have held steady at 160 WS for the second consecutive week, reflecting a 20% annual increase. On the USG-Cont route, MR2 rates have surged above 200 WS, marking a 50% increase from the previous week.
SECTION 2/ SUPPLY
‘Dirty’ (# vessels) – Mixed
The supply trend for crude tankers remains mixed. The number of Aframax vessels in Primorsk has decreased, whereas the increase in VLCCs remains significantly higher than the annual average.
VLCC Ras Tanura: The number of ships has risen to nearly 80, which is almost 10 more than the previous week and 20 above the annual average.
Suezmax Wafr: The current ship count remains above 60 for the second consecutive week, reflecting an increase of 8 compared to levels observed two weeks ago.
Aframax Primorsk: For the past three weeks, the number of ships has remained significantly lower than the annual average of 30, nearly 13 fewer than the levels recorded five weeks ago.
Aframax Med Novo: Since the end of week 22, the vessel count has remained close to the annual average of 10. This trend appears likely to continue at a similar pace through the end of the month.
‘Clean’
LR2 (#vessels) – Increasing
MR (#vessels) – Mixed
Clean LR2 AG Jubail: The upward trend in the number of vessels observed in the second week of June continued steadily, with the count reaching 9. The lowest point was recorded in week 18.
Clean MR: Vessel activity for MR1 at Algeria’s Skikda port dropped to 29, nearly 3 below the annual average, and almost 10 below the peak observed two weeks ago. In contrast, MR2 activity in Amsterdam has shown intense volatility over the past four weeks, recently reaching 37, nearly 8 more than the previous week.
SECTION 3/ DEMAND (Tonne Days)
‘Dirty’ Decreasing
Dirty tonne days: The decrease in the growth of VLCC tonne days persisted for one more week before the end of June, continuing the trend of reduced activity in this segment. The subdued growth for now seems to be the prevailing pattern. Meanwhile, the Suezmax segment is showing early signs of a possible upward reversal, though confirmation of this trend is expected in the coming days as more data becomes available. In contrast, the Aframax segment presents a more complex scenario. The outlook here is characterised by high volatility, which makes it challenging to predict a definitive trend, whether upward or downward.
‘Clean’ Decreasing
Panamax tonne days: The growth pace in June showed signs of a downward trend over the previous two weeks. However, there now appears to be a reversal, with growth picking up and firming compared to the low observed at the end of week 23. For Clean MR tonne days, the MR1 vessel has experienced a significant decline over the past three weeks, with no signs of an imminent reversal. The last peak for MR1 was observed in weeks 17 and 18. In contrast, the growth of tonne days for MR2 vessels maintained a relatively flat momentum throughout June.
Source: By Maria Bertzeletou, Signal Group