⊗

The Middle East continues to be a vital part of the global oil market, both in terms of production from nations in the region, and a bottleneck in global seaborne oil supply chains. In December OPEC+ announced that it would trim production further, reducing the amount of seaborne exports of crude oil from the region. OPEC+ is to cut its output by 2.19m barrels per day for all of Q1 2024, led by Saudi Arabia rolling over its existing cut. Total OPEC+ production curbs now exceed 5m barrels per day, though this is a theoretical number at best and barely relates to actual output as most suppliers bust their quotas regularly. OPEC+ now provides around 40% of global crude oil, while OPEC itself amounts to around 30% of the total. Any tanker operators who were worried about the cuts might have wondered if they reflected a real global lack of oil demand or they were simply about supporting prices in an era of overcapacity in global oil production. In any event, less OPEC oil on the water – the cuts are equivalent to about one VLCC cargo per day – would ordinarily be bad news for crude oil tanker freight markets. However, the Middle East’s geopolitical centrality came to the fore at the same time, as the Iran-backed Houthis in Yemen began lobbing explosives at all and sundry vessels passing within range of their cheap but effective armaments. The advice from the US Navy, patrolling the area with its UK Royal Navy poodle in tow, is to stay out of the area. As insurance premiums rise with risk, shipowners are, in increasing numbers, deciding to avoid the area around Bab el Mandeb and sail around the Cape of Good Hope to transit from the Indian Ocean to the Atlantic (or vice versa). The world’s biggest importer of oil, China, has said little and done less at this point, because its oil supplies from the region are not (yet) being targeted. Ships loading in the MEG turn to port (east) as they sail south out of the Gulf, staying well away from Yemen. Thus VLCC time charter equivalent earnings from the MEG to China, having ended 2023 at around $35,000 a day, rose to a peak of around $49,700 in mid-January before slipping back to $35,000 later in the month. VLCC rates from the US to China did better, ending 2023 at $32,300 a day and similarly peaked at over $55,500 on January 15, but fell less rapidly to $44,500 or so by the January 26. VLCCs sailing to East Asia from West Africa enjoyed the highest rates of the month with TCEs peaking at around $55,000 a day in mid-January before slipping back to around $36,000. Suezmax earnings exceed those for VLCCs throughout December and performed well in January too, with brokers quoting rising rates for the main West Africa - Europe voyage during the month, from $37,000 at the end of December to $54,500 at the end of January. Suezmax earnings on the cross-Med route zoomed in January from below $30,000 to over $70,000 before falling back in the last week of the month to $53,500 or so. Yet it was once again the aframaxes which were the owners’ darlings in January with rates in the Caribbean increasing from around $26,000 at the end of December to over $104,000 in late January. Afras trading from the US Gulf to Europe enjoyed a rapid rise in earnings in the first half of January from around $38,000 to a high of over $81,000 but slid back to around $51,000 later on in the month. In the North Sea, afras have enjoyed their usual winter premium, with earnings to the UK moving from a low of $58,500 in early January to $70,500 by mid-month before slipping to $57,000 or so later on. Earnings from the North Sea to Germany remain over $70,000 a day. Rates on Southeast Asia – Australia aframax trades were less volatile, hovering in the $36,000 to $40,000 range for all of January to date. In the Cross Med trades, as with suezmaxes, rates rocketed from $38,000 in early January to a peak of over $76,000 in mid-month before falling back to around $57,000 later. The good news spread to the aframax sized LR2 product tanker segment, as Red Sea disruption led to a spike in TCEs. On the benchmark Middle East to Japan route, daily hire erupted from a low of $29,500 on January 10 to $101,100 on January 25, with no limit for the spike in sight as brokers quote numbers over $110,000. On the mirror voyage from the Middle East to West Europe, rates more than doubled from a low of $47,400 on January 2 to $117,300 by January 26. LR2 rates last exceeded $100,000 a day in April and May 2020 during the first pandemic lockdown. Only the Algeria-Japan route disappointed with rates increasing from around $25,000 a day at the start of the year to $31,500 three weeks later. Medium range tanker earnings were broadly unaffected by events in the Middle East with the notable exception of rates from the AG to East Africa, which were catapulted from a humble $21,400 in early January to a stellar $52,800 three weeks later. In the Atlantic, the basket of earnings published by the Baltic Exchange ended 2023 at $43,703, before halving to $25,108 on January 12 only to recover to $42,488 on January 23. This proved unsustainable however and rates slid back to $36,460 just two days later in what has become a volatile and positional market based on the usual arbs in prices either side of the pond. The Baltic Dirty Tanker Index averaged 1,414 points for the first 25 days of January, close to the January 2023 average of 1,401 points, while the Baltic Clean Tanker Index averaged 935 points in January so far this year compared to 868 points last year. For those tanker operators and investors who can put aside the human tragedy in the Middle East and the physical risk to ships and seafarers, it has been a happy new year.

Tankers enjoy a very happy new year

The Houthis have ensured a sensational January for most tanker segments

⊗

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