Tanker – Weekly Market Monitor

January 29, 2025

Chart of the Week: VLCC AG & Aframax Mediterranean Vessel Count & Market Rates

This week’s focus centers on comparing VLCC tanker counts in the Arabian Gulf (AG) with Aframax activity in the Mediterranean, as well as analysing the performance of Baltic rates.

The fourth week of February brought a downward correction in the sharp rise of VLCC AG-China rates, which had surged following the announcement of U.S. sanctions on Russian crude oil destined for China and other Asian markets. The geopolitical shock once again played a critical role in driving volatility in dirty tanker freight rates, giving a temporary boost to a market that showed weak signs at the start of the year. While VLCC AG-China rates have declined, bullish sentiment remains stronger compared to the lows of January. However, the increased vessel count indicates robust availability, which may temper expectations of sustained firmness in the market.

In the Aframax Mediterranean market, rates continue to show significant improvement from the weak levels seen earlier in the year, with no clear signs of a downward trend yet. The sentiment surrounding sanctions has had a noticeable impact on the market, despite vessel availability remaining robust. This divergence between market sentiment and the actual vessel count underscores the psychological factors influencing recent rate volatility.

Meanwhile, new U.S. sanctions have led to a substantial reduction in Russian oil exports as traders pause offers. Indian refiners, including Bharat Petroleum, are struggling to secure Russian oil for March delivery. According to Standard Chartered, these sanctions are expected to remove more Russian barrels from the market, driving oil prices higher. Looking ahead, the removal of Russian crude shipments to China and India could amplify the impact on dirty tanker freight rates. A further reduction in sanctioned tankers would tighten vessel availability, while rising demand from Asian buyers of discounted Russian oil could shift sourcing towards UAE producers, adding additional pressure to the market.

By the end of the week, oil prices showed a downward trend following news of the U.S. President urging OPEC to lower crude prices while unveiling plans to boost U.S. production. Over the week, Brent crude fell nearly 3%, while WTI dropped close to 4%.

For more information on this week’s freight supply and demand trends, see the analysis sections below. You can also log in to our Newsroom page under Insights & News to stay updated with the latest reports.

SECTION 1/ FREIGHT

Market Rates (WS)

‘Dirty’ WS – Mixed
VLCC – Suezmax – Aframax

Sentiment in the dirty freight market was mixed as the month drew to a close. While the bullish sentiment on the VLCC MEG/China route experienced a downward correction, spikes in the Aframax Mediterranean segment continued.

VLCC MEG-China freight rates have declined to 53 WS, marking a sharp 30% drop week-on-week. Suezmax rates for shipments from West Africa to continental Europe remained steady at 75 WS, reflecting a 30% decrease compared to the same week last year. Meanwhile, Suezmax rates on the Baltic-Mediterranean route fell below 90 WS, down 34% year-on-year.
Aframax Mediterranean freight rates increased to WS 140, representing a 17% decline over the past week and remaining 20% lower than the same period last year.

‘Product’ WS

LR2 Firmer

LR2 AG freight rates climbed to approximately WS 140, marking a 40% increase month-on-month. However, they remain 60% lower compared to the same period last year.

LR1 Steady

Panamax Carib-to-USG rates have remained relatively stable throughout January recording slight downward corrections, hovering around WS 125. Recent levels reflect a 60% decrease compared to the same period last year.

‘Clean’
MR Firmer

MR1 rates for shipments from the Baltic to the Continent increased to 200 WS, representing a 5% monthly rise but a 44% decline compared to the same week last year. Meanwhile, MR2 rates for shipments from the Continent to the US Atlantic Coast (USAC) rose significantly to WS 185, reflecting a 48% monthly increase. In contrast, MR2 rates on the US Gulf to Continent route remained weaker at WS 115, marking a 30% decrease compared to the same period last year.

SECTION 2/ SUPPLY

‘Dirty’ (# vessels) – Decreasing

The supply of crude tankers has shown a downward trend, falling below the annual average for key routes such as the VLCC AG-Far East, Aframax Mediterranean, and Baltic. This decline highlights weaker tonnage availability in these regions, potentially impacting rates. However, it remains uncertain whether this trend will persist into February, as market dynamics and seasonal factors could influence the supply landscape in the coming weeks.

VLCC Ras Tanura: The number of ships has dropped to 62, reflecting a decline of 10 compared to the annual average and nearly 20 fewer than the levels recorded prior to the end of December.
Suezmax Wafr: The current ship count stands at 72, exceeding the annual average by 12. However, it appears to have stabilized, reaching a floor after several weeks of persistent growth.
Aframax Med: The number of ships has continued its downward trend since the end of last year, reaching its lowest level in the past 12 months. Vessel availability remains tight, suggesting that these significantly low levels are likely to persist throughout February.
Aframax Baltic: The number of ships has remained consistent with the previous two weeks, staying below the annual average of 30, at approximately 25.

‘Clean’
LR2 (#vessels) – Increasing

MR (#vessels) – Decreasing

Clean LR2 AG Jubail: The end-of-month trend has shown an upward trajectory, though it remains slightly below the annual average of 11.
Clean MR: At Algeria’s Skikda port, the number of vessels has declined to 25, falling nearly 7 below the annual average. Meanwhile, MR2 activity in Amsterdam has shown signs of a slowdown, despite recently rising slightly above the annual average of 30.

SECTION 3/ DEMAND (Tonne Days)

‘Dirty’ Mixed

Dirty tonne days: The VLCC segment has experienced a significant decline in dirty tonne-day growth throughout the month, reaching its lowest levels since January of last year. Meanwhile, the Suezmax and Aframax segments have shown signs of an upward correction; however, their growth rates remain below the annual average.

‘Clean’ Mixed

Panamax tonne days: The growth rate exhibited an almost steady trend in the last two weeks of January; at levels hovered nearly the annual average. The recent growth rate is now notably higher than the record low seen at week 40 in the previous year.
MR tonne-days: The growth rate for the MR vessel size segment has been declining since the start of the year. However, for MR2 vessels, it remains significantly higher than both the annual average and the lows recorded in the fourth quarter of last year. In contrast, the MR1 segment is hovering closer to the annual trend.

Source: Signal Ocean