Persistent Weakness ??? Trump likely to aggressively attempt to limit gasoline price appreciation ?? Biggest Dark Fleet Crackdown Yet ????
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Persistent Weakness - E.A. Gibson Shipbrokers Ltd
Crude and product tanker markets have been under heavy pressure so far in Q4, with clean West rates currently the only bright spot. Whilst markets are frequently volatile, persistently weaker returns in the middle of a traditionally strong fourth quarter are causing concern. What are the demand factors behind weaker rates and earnings?
Aframaxes have been under the biggest pressure on the crude side. Kpler data shows global crude tonne miles for this size group are down by circa 2.5% year-on-year during the first ten months of 2024, despite the start-up of the expanded TMX pipeline and an uptick in trade out of the US. Here, the largest decline in tonne miles have been seen out of Russia; yet, Red Sea attacks and maturing crude production in Asia have added further downward pressure, whilst recent outages in Libya and field maintenance in the North and Caspian Seas have also temporarily reduced demand.
In contrast, VLCC demand is up modestly year-on-year, with less trade out of WAF/USG and lower demand into China being offset by increases in shipments out of Latin America, whilst smaller gains earlier in the year were also seen in VLCC shipments from the UKC.
The picture is more complex for the clean tanker market. Averaging data for the first ten months of this year, LR2 tonne mile demand is notably up year-on-year, much smaller gains are seen in MR demand, whilst LR1 and Handy demand is modestly down. Increases in LR2 demand are largely driven by diversions via the Cape of Good Hope and absolute gains in AG/India-West trade. However, if we zoom into the data in greater detail, LR2 tonne miles surged during the first five months of the year but have since been under downward pressure due to dirty-to-clean switching. LR1s have also suffered from this development. MRs and Handies have been negatively impacted by lower clean exports out the UKC/Med, most notably in recent months amid heavy European refining maintenance and declining exports into West Africa. In addition, Handies have been further pressured by rising competition from MRs. In the East, MRs have suffered from lower intra-regional CPP trade. Across all clean tanker segments, a clear decline in tonne miles has been observed for shipments out of Russia.
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Trump likely to aggressively attempt to limit gasoline price appreciation - Kpler
As Donald Trump prepares to return to the White House, the market awaits what could be major changes in economic policy, and geopolitical positioning for the United States. This includes a focus on Iran and OPEC+. It is currently our base case that a Trump administration will take very seriously the price of oil given the downstream impacts on gasoline prices. In Trump’s first term, rising gasoline prices were often a catalyst for aggressive tweets calling on Saudi, and the OPEC+ block of countries more broadly, to pump more oil.
Our official Brent spot forecast expects an average price of roughly $75/bbl next year, down from what we expect will be an $81/bbl average this year. Broadly speaking, we feel an $80/bbl upper limit on spot Brent is likely. Any time prices move above this level, the White House will likely pressure OPEC to pump more oil, many members of which will be happy to oblige. This will help to offset any loss of Iranian volumes if Trump decides to escalate the current Middle Eastern conflict with Israel or pressure China to purchase fewer Iranian barrels. At present, Iran is exporting nearly 1.6 Mbd, up from roughly 500 kbd when Trump left office in early-2020.
Daily US Spot Unleaded Gasoline Price ($/gal, left) and State of Economy Survey (right)
Trump was certainly more successful than Biden at capping gasoline prices, albeit this was in part a result of external factors. Biden was forced to deal with surging demand in the immediate post-Covid years, a war in Ukraine, and an OPEC+ organization that did not share an amenable relationship with the White House. Over the course of Biden’s term, average retail unleaded gasoline prices held at $3.33/gal, with a standard deviation of nearly $0.46/gal, implying high amounts of volatility. During Trump’s first term in office, prices averaged just $2.38/gal, with a standard deviation of $0.27/gal.
It is conceivable that Trump will once attempt to keep gasoline prices under control over the next four years. Trump has long held an innate awareness that consumer sentiment declines quickly as gasoline prices move towards extreme levels (>$3.50/gal). But what should we expect when it comes to the average gasoline price in 2025? If we assume on average a $3/bbl discount on WTI ($72/bbl) against Brent next year, this implies a roughly $2.80/gal price for US retail unleaded gasoline, which is $0.42/gal below the 12-month average through October of this year.
UK sanctions 30 ships and two Russian insurers in biggest dark fleet crackdown yet - Lloyd's List
The UK government has sanctioned two Russian insurance companies and 30 tankers for breaching sanctions on Russia’s oil and shipping industry.
Alfastrakhovanie and VSK, both providers of marine insurance to vessels shipping Russian energy commodities, were designated. The UK government already sanctioned Ingosstrakh, another provider, last June.
This takes the total of ships listed by the Office of Financial Sanctions Implementation in 2024 to 73, the government said.
When shipyard capacity is constrained, the lead time for commissioning new vessels lengthens. Shipowners may then be forced to keep older ships in operation longer, or they might look to the second-hand market to meet their fleet needs. Tight yard space can also affect newbuild pricing, pushing up costs and limiting flexibility.
The availability of shipbuilding slots has been bottlenecked, particularly in the most prolific shipbuilding nations. China now averages around 3 years in delivery time, with Tankers at 2.8 years, and LNG vessels even higher. Capesize Dry Bulkers ordered in 2024 are currently expected to be delivered in 3.6 years on average.
Eleven of the tankers are owned by Russian government-controlled Sovcomflot with the remaining vessels part of the so-called elderly and substandard dark fleet* of sanctions-circumventing ships operating outside Western jurisdiction.
All but two are aframax and suezmax tankers, the most heavily relied upon size for Russian shipments of crude and oil products to buyers in Asia and Türkiye.
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