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First there was going to be a supercycle, then there wasn’t, then there was again until Friday June 23 when a brief bubble in VLCC rates deflated. VLCC rates, basis Baltic Exchange calculations, increased from an average of $16,546 a month for May to $32,215 for the first three weeks of June, though the peak was $52,517 on June 16 from which the VLCC average slipped to $32,802 by June 22. As usual, shipbrokers will offer higher numbers for modern, scrubber-fitted, eco tonnage, with Poten rating a VLCC voyage from the MEG to the Far East at $69,200 as of June 22. After the northern hemisphere’s longest day, VLCC rates trended down from a peak on the back of Saudi production cuts and rising vessel supply, according to brokers. There are also concerns about demand following central bank interest rate increases around the world during June which will dent consumer discretionary spending for the second half of the year. Still, many oil market forecasters are predicting a boom in demand in the second half of 2023, to coincide with OPEC production cuts. This could drive prices north from their $70-80 trading band. OPEC’s problem is that non-OPEC production increases, including biofuel and synthetic fuel production, could be enough to meet demand growth all the way to 2025. Oil consultancy Energy Intelligence forecasts H2 demand to grow by 1.4m barrels per day (bpd), but non-OPEC producers such as the US, Brazil, Norway and Canada, are expected to crank out an additional 1.5m bpd during that period with the US providing half of that total. That would presumably be good news for VLCC tonne-mile demand as two thirds of this year’s predicted oil demand growth comes from China. That is, unless Iran’s growing exports to China replace those from the US. The Islamic republic’s combined crude oil and condensate exports reached 1.5m bpd in May, the highest level since November 2018 barring a one month spike of 1.4m bpd in December 2022. Meanwhile, suezmax average monthly earnings to date are $46,372 basis the Baltic Exchange, marking the third monthly fall since March’s $76,678 average. The West Africa – Europe daily hire rate rose during the first half of June to a peak of over $67,000 before sliding back to $53,500 or so later in the month following those interest rate hikes. Brokers would add a couple of thousand dollars to those levels but the trend is the same. The aframax sector remains the dollar per deadweight king of crude even as earnings corrected during June to a to-date average of $42,650 compared to $55,436 in May. Cross-Med aframax rates have been steady in June, varying either side of $40,000 a day but down on peaks over $73,000 a day in late May. North Sea rates have also been rangebound either side of $50,000 a day, having peaked at over $62,000 a day in mid-May. In the east it’s a slightly weaker story with Kuwait-Singapore rates sliding from over $58,000 in May to under $40,000 in late June. Afra rates in dollars remain over $50,000 a day but are below the year-to-date average of over $62,000 a day. In the product tanker space, the benchmark Atlantic MR market enjoyed higher utilisation rates in May and June as US gasoil flowed to the EU, diverting cargoes from Latin America, which has instead been buying Russian exports. According to Vortexa, Atlantic MR tanker tonne-miles hit a record for May of nearly 10bn, about a third higher than in May 2022. This has however not helped freight rates. When expressed as TCEs, the Baltic’s Atlantic MR average has fallen from a shade over $35,000 in late May to just $17,273 as of June 22. The Pacific MR market is faring slightly better with rates also down from the mid-30s to low 20s between late May and late June, with the trend looking weaker for the remainder of the month. The larger LR2 benchmark voyage from the MEG to Far East, known as TC1 to Baltic afficionados, has also weakened in June to between $18,000-19,000 a day after being in the mid-30s at the end of May. This is despite increased Chinese gasoil exports. The reason is that China continues to take advantage of cheap Russian oil, which does little to support MEG exports. Asian crack spreads have narrowed too, which has pushed rates on Med-Far East LR2s into negative territory on a TCE basis for the first time since January. Overall, the clean tanker market is behaving as expected for June, i.e., underwhelmingly.

Typical seasonality strikes tankers

Splash Extra assesses the earnings of every tanker type as summer descends on the northern hemisphere.

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