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As the internet gets itself into a lather about events in Israel and in Gaza, uncertainty in real life (IRL as the twitterati call it) about conditions in the Middle East led to rising oil prices in October with Brent rising to over $96 a barrel at one point and settling around $92.5 by October 20. Tanker markets benefited from increased buying as traders looked to cover forward positions in a rising market. VLCCs earnings, basis the Baltic Exchange had their second worst September since 2017, averaging just $60 per day (after the whole of 2021 and the first seven months of 2022 were negative) but rebounded to an average of $8,290 in the first three weeks of October including a peak of $21,397 on October 17. As usual, brokers will give you bigger numbers on modern eco tonnage with Poten rating the Middle East to Far East voyage at $40,000 a day on October 13, compared to just $8,000 a day a month earlier in those happy, confident days when the US State Department said the Middle East was quieter than ever and The Economist magazine ran a cover story and leader about the New Middle East. Markets can go down even faster than up and some of the uncertainty premium leaked from VLCCs with Poten marking them down to $39,200 by October 20. The suezmax market has thrown off concerns around Nigeria’s tax issues and rates on WAF-UKC are reported by brokers to be upwards of $44,000 a day compared to just $6,000 a day or so in mid-September. Even the Baltic’s WAF-UKC numbers have followed suit rising to a peak of $49,757 on October 18, while their S2 suezmax average numbers have leapt from below $10,000 a day a month ago to $53,000 and rising by October 20. Gains in one sector of the tanker market seem to offset losses in the other Aframaxes have however taken the grown with the Baltic A6 average improving from just below $10,000 a month ago to over $65,500 on October 20. This includes a six-fold rise in cross-Med rates to $77,800 in the month to October 16 before a small breather over the following days. There was also a near seven fold increase in eastbound transatlantic aframax earnings to around $56,000 a day in the first half of October. Will the rally continue? Presumably it will if oil prices do not rise to demand-destroying levels, but also because tonne mile demand and earnings usually rise in Q4. After such a disappointing Q3 in which the BDTI averaged 830 points, dropping below four figures for the first time since the first quarter of 2022, the recent earnings surge is welcome to owners betting on seasonal gains. Products tankers by comparison have endured a mixed month. The LR2s enjoyed a 52% gain in Middle East to Japan earnings, rising to $39,617 by October 20. On the mirror route, from the Middle East to Europe, LR2 day rates rose 36% over the same 30 day period to $47,717. Middle Eastern refineries are reported in some quarters to be enjoying better margins than their Asian competitors, so they are filling in westbound voyages, with ramifications elsewhere. For instance, LR1 tankers in the Med disappointed with day rates down 57% to $23,327 in the month to October 20, while rates from the Red Sea to ARA rose 18% over the same period to a healthier $35,906 and rates from ARA to West Africa added 10% to $34,655. Overall, average LR1 rates are on a four month rising trend from $17,700 or so in July to $30,100 in October to date. Having been unfashionable for so long, are they now finding a new lease of life or is limited fleet growth in LR2s driving up their earnings? Rates slumped for MR tankers In the Atlantic shipping 37,000 tonnes of gasoline from ARA to the US East Coast as US gasoline demand appeared to slow down. They were $20,000 a day or so on September 20 but only $10,000 a month later. On the reverse route from the USG to ARA with gasoil cargoes, things were worse with day rates down from around $16,000 to $3,000 by October 20. Rates slid less dramatically in the Pacific with earnings on the South Korea to WCNA route down 11% in a month to $34,660 on October 20 while on the South Korea to Australia route they were off 10% at $27,400 or so in the month to October 20. A 20% fall on the Singapore-Australia MR voyage over the same period led to a $26,223 rating by the Baltic on October 20. As usual, gains in one sector of the tanker market seem to offset losses in the other, with the dirty tanker index recording its biggest gain for a year while the clean tanker index surprised on the downside in October to date.

War drums and tankers

What Israel’s war with Hamas means for the tanker sector.

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