⊗

Oil prices wobbled about in June as investors considered the possible effects of rising inflation and interest rates on consumer spending and driving habits especially during the US summer driving season. Yet, as of June 24, Brent and WTI remained over $100 a barrel as tight supplies continue to support prices. Public health policy during the pandemic closed certain refineries in Europe and the US which have yet to reopen, limiting refining capacity, while others converted to storage or production of alternative products such as hydrogen. Meanwhile, lockdowns in China have held some refinery capacity offline. A shortage of refined products is keeping retail prices up even as crude oil futures are falling while some traders anticipate lower oil demand as rising inflation and interest rates hit consumers in the pocket. Russia to China tonne miles don’t give much support to global tanker freight markets Amrita Sen, of consultancy Energy Aspects, says, “The restraint is on refining capacity. We’ve seen crude prices come down but products really haven’t.” That lack of refining capacity is capping crude oil seaborne trade and freight rates, but the freight markets are up month-on-month, with the crude oil tanker and oil products tanker markets rising simultaneously for the first time this year. China’s crude oil imports were positive in May, rising 12% year-on-year to 10.8m barrels per day. They are expected to rise again in June as well. Imports are growing most from Russia – no surprises there as China buys Russian oil at a healthy discount to market prices. China has been buying 2m barrels per day from Russia putting it ahead of Saudi Arabia as China’s leading supplier. Unfortunately Russia to China tonne miles don’t give much support to global tanker freight markets. How has this all translated into tanker ship earnings? Sentiment has been rising if not actual freight rates in every case. The Baltic Exchange’s VLCC time charter average has fallen from $-26,409 on May 23 to $-31,681 on June 22 as the 2m barrel ships have not benefited from China’s switch to cheap Russian crude oil. However, the S2 suezmax time charter average swelled 39% over the same period from $15,410 to $21,466, as West African and Middle Eastern exports to Europe increased. The Baltic’s A6 aframax TCE rose 21% over the month to June 22, from $18,963 to $22,878. This was due to a switch in Russian oil exports from Europe to China and its knock-on effects. TD17, the aframax Baltic-Western Europe route, lost 17% in the month to June 22, falling from $35,500 to $29,422. Contrarily, TD24, the aframax route from Russia’s far east to China, increased 28% over the same period from $56,513 to $76,073. Singaporean buyers have switched to Middle Eastern barrels, so TD7 from Kuwait to Singapore has more than doubled from $15,998 on May 23 to $34,075 on June 22. TD19, the cross-Med aframax route, rose 260% in a month from $10,516 on May 23 to $37,867 on 22 June. One unaffected route was TD14, the aframax route from Southeast Asia to Australia, which was up just 6% to $17,322 on June 22. The clean tanker freight market has continued the positive trend set in April and May with a focus on Asian markets, just as we reported last month. TC1, the benchmark route for an LR2 clean product tanker sailing from the Middle East to Japan, was up 15% in a month from $45,758 on May 23 to $52,505 on June 22. TC5, the corresponding voyage on the smaller LR1 increased 20% from $42,240 to $50,868 over the same period. In the Atlantic, MR tankers lost ground with the Baltic’s Atlantic MR basket losing 15% in the month to June 22, falling from $55,069 to a still healthy $46,776. The Pacific MR basket however leapt 99% from $32,098 on May 23 to $63,372 on June 23. As US refinery capacity is down and running hot compared to pre-pandemic days, the country is drawing refined oil products imports from South Korea, so TC10 (40 kt clean products from South Korea to west coast North America) rose 138% from $23,458 on May 23 to $56,625 on June 23. TC11 (40 kt clean products from South Korea to Singapore) was consequently pushed even harder, rising more than six-fold from $6,305 on May 23 to $47,233 on June 23, via a peak of $49,285 on June 21. With US refiners so busy, US crude oil producers are trying to export barrels to the Far East which is getting VLCC owners excited. At the Marine Money conference in New York in June, product tanker CEOs were said to be uniformly bullish for the next few years. No doubt their enthusiasm relates to a low orderbook, just as crude oil tanker owners point to the total lack of VLCC orders so far this year. Nonetheless, with Jay Powell of the Fed entertaining talk of a global recession, tanker owners will have their fingers crossed in their pockets even as they talk up the market to equity analysts.

Tankers are on track at last but for how long?

Tanker owners are finally in a position to talk up the markets.

⊗

To continue reading, please login below or subscribe here.

Read Next

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Maritime CEO Forum Singapore

Maritime CEO Forum Monaco

Advertising

Press Releases

Splash

Splash Extra

Splash Special Reports