Dirty freight rates for Very Large Crude Carrier voyages loading in West Africa have firmed substantially since the start of October, with market participants citing increased demand for oil to replenish depleted stocks and support from booming Suezmax and Aframax markets.
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Register NowPlatts, part of S&P Global Commodity Insights, assessed wet freight on the 260,000 mt WAF-East route at w76 on Oct. 31, up w5 from the previous day and w35 from the 19-month low of w41 it hit earlier Oct. 6.
Platts assessed freight on the 260,000 mt WAF-UKC route at w85 on Oct. 31, up w5 from the previous day and w42 from its Oct. 6 low of w43.
The most recent rise in rates was prompted by reports on the morning of Oct. 31 that ATC had placed the Nave Buena Suerte on subjects for a 260,000 mt cargo loading in West Africa and discharging in the Far East, off a Nov. 16 laycan, at w80. There was also a discharge option in India at w85.
Most sources indicated that they thought this fixture had been agreed at a premium to the market rate due to the prompt loading dates. Nevertheless, even when normalized to take this into account, the fixture still represents a significant firming of the market past last-done levels.
Rising crude demand
"There's higher demand in Europe for oil, partly due to winter stocks and partly due to the Israel-Palestine situation, which has pumped up the Aframax and Suezmax markets," a UK-based VLCC broker said. "VLCCs have been able to increase on the back of this."
The same broker also pointed to a firming Persian Gulf segment, which is one of the key drivers for the WAF VLCC market.
Platts assessed wet freight on the 260,000 mt Persian Gulf-Far East route at w70 on Oct. 31, up w8 from the previous day and w34.5 from a low of w35.5 on Oct. 6.
A Europe-based shipowner also put the recent rise in the VLCC segment down to high crude demand as winter oil supplies in many countries run low (as high prices and production cuts have made crude oil hard to obtain recently), as well as fears that the conflict in the Middle East could drive crude prices up even further.
However, a second Europe-based VLCC owner disagreed that the Israel-Hamas conflict was having a major impact on the market, arguing that it would only start having an effect if the conflict escalated to involve more countries in the region.
North Sea sentiment firm despite lack of liquidity
Sentiment for the North Sea-Far East market has also firmed recently, in line with strength in the US Gulf-China market.
Platts assessed freight on the 270,000 mt Hound Point-Far East route at $9.6 million lump sum on Oct. 31, up from its September average of $6.7 million.
However, despite remaining an important indicator of the strength of the VLCC market, this rate has become largely theoretical due to a lack of liquidity.
The last reported fixture for the market dates from Aug. 16, when ATC placed the Hellas Paliros on subjects for a 270,000 mt cargo loading in Hound Point and discharging in South Korea, off a Sept. 10-20 laycan, at an undisclosed rate.
Sources attribute the lack of activity in the North Sea-Far East market to changing oil patterns following the Russian invasion of Ukraine in February 2022.
"Europe used to use a lot of oil from Russia; now this is missing [due to sanctions on Russian oil imports], so European countries are now using the cargoes which would otherwise have gone to the East," a Europe-based VLCC owner said.