Crude Oil Trade: Aframax gains in the Mediterranean

Across the North Sea market, Aframaxes seem to have lost momentum during the last couple of weeks, with enquiries considered too thin to support spot rates. Earlier anticipations for more pressure materialised, with only limited interest for VLCCs lately in the region, but rates have reached USD 4.5 million to South Korea driven by US Gulf/Caribs activity. Even if the conditions improve in the Mediterranean, with Aframaxes starting to report gains, the situation in the North Sea is not ready to recover any time soon, with rates for 80,000mt pushed below WS 100 for UK/Continent and closer to WS 70 for 100,000mt from the Baltic. There is hope on the horizon, however, since demand is expected to pick up over the coming month with owners to prove tougher over the near-term.

Meanwhile, there has been some recovery lately for Aframaxes in the Mediterranean, after the pressure felt last month due to the plethora of vessels available nearby combined with the declining number of enquiries. But rates for Suezmaxes have hardly seen any movements at all, with a vessel getting paid around USD 2.8 million to travel to China. After charterers recently increased the number of cargoes in the market, Aframax rates approached WS 120 for the Med and up to WS 130 from the Black Sea.

Focusing on the clean market, there has been an increase in cargoes from the Black Sea since mid-May, leading to a positive correction in rates ex East Med. Tonnage remains tight while there are still some requests to be covered. But as we expect more ballasters over the next couple of weeks, the situation could quickly change. Assuming available tonnage will not quickly surpass the level of enquiries, gains could last longer. Sentiment across owners remains bullish for now.

Moving to the clean market across UK/ Continent, there seems a good balance between owners and charterers, as enquiries over the last week gave hope for rate gains, but unfortunately tonnage quickly increased to meet requirements. There is still optimism that the Med and other markets nearby could quickly attract some ballasters, providing more space for opportunities in the North over the coming weeks.

Handysize vessels have remained at encouraging levels achieved since mid-May, supported by the healthy amount of fixing from the Baltic. However, future employment opportunities do not seem promising, which could depress rates in June. Any future recovery would be reliant on owners repositioning ballasters elsewhere, which does not look probable, at least any time soon.

Posted 03 June 2019 by Fotios Katsoulas, Associate Director, Lead Analyst Tanker Shipping & Alternative Fuels, S&P Global Commodity Insights