Dirty freight rates for the Very Large Crude Carrier West Africa to UK-Continent route jumped to a 16-week high Oct. 13, with market participants citing firming sentiment, improved demand and a tightening tonnage list.
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Register NowPlatts, part of S&P Global Commodity Insights, assessed wet freight on the 260,000 mt WAF-UKC route at w75 on Oct. 13, up w18 from the previous day and w32 from the 19-month low of w41 it had hit just a week earlier on Oct. 6.
In the evening of Oct. 12 it was reported that in the morning Exxon had placed the Maran Antiope on subjects for a 260,000 mt cargo loading in Nigeria and discharging in UKC off a Nov. 4 laycan, at w76.75.
A similar rate was repeated on the morning of Oct. 13, with Total placing the Barakh on subjects for a 260,000 mt cargo loading in WAF and discharging in UKC off an Oct. 31 laycan, at w70, with a loading option in Nigeria at w76.5.
Just three days earlier, on Oct. 11, Exxon had fixed a voyage for the same route at w46, having placed the Cosnew Lake on subjects for a 260,000 mt cargo loading in WAF and discharging in UKCM off a Nov. 6 laycan.
Rising differential
The rapid jump in WAF-UKC VLCC rates has seen the differential between WAF-UKC and WAF-East grow from its usual w5 to w15 -- its highest level since December 2022.
Platts assessed freight on the 260,000 mt WAF-East route at w60 on Oct. 13, up w6 on the day.
The WAF-UKC VLCC route tends to be fixed at a higher Worldscale rate than WAF-East as it is a far shorter voyage, although the exact premium can fluctuate in times of market volatility.
Mixed views on future prospects
Market sources expressed differing opinions on the prospects of a sustained rise in the West of Suez VLCC markets.
"VLCCs will continue to go up -- owners are on a roll and there's lots of inquiry, which gives them the option to go to any region they want," a UK-based VLCC broker said.
Even though tonnage levels are still relatively high, they have fallen from what they were in the summer, and rising demand from charters has given owners the leeway to push up rates, the same broker said.
By contrast, a Europe-based VLCC broker had a more cautious market outlook.
"I can't see these higher rates being sustainable for very long, but we're certainly bullish for next week -- all sectors moving up together is a good indicator," a Europe-based VLCC broker said.
Rates should rise into the fourth quarter, as usually happens, but Saudi output and the broader demand side of the equation haven't changed enough for the market to continue spiking over a sustained period, the same broker said.
A second UK-based VLCC broker agreed with this view, arguing that the VLCC market would continue to firm into the fourth quarter, but that it was unlikely to return to the highs seen in November 2022 (when freight for the WAF-UKC VLCC route stood at an average of w125) or March 2023 (when WAF-UKC VLCC averaged w95).