Tanker Market: Upward Trend Ahead

The tanker market is headed for a strong period ahead, in terms of freight rates. In its latest weekly report, shipbroker Xclusiv said that “2024’s early signs suggest a very promising start for the tanker market, particularly in the product sector. Contrary to the previous 6 years’ trends, which indicated a downward trajectory for product markets during the first months of the year, 2024 has bucked the trend. Since the beginning of January 2024, the MR Pacific Basket has experienced a remarkable doubling of its earnings to USD 56,707/day, climbing to the highest level since late December 2022. Meanwhile, the MR Atlantic Basket has also witnessed a surge, reaching USD 36,460 per day, representing an increase of approximately 31% since the start of the year. Furthermore, the LR1/LR2 rates linked to Middle East surpassed USD 100,000/day and have doubled since 2nd January 2024. Mainly, the LR2 TC1 route (Middle East Gulf to Japan) closed the week at USD 100,894/day, the highest level since mid-May 2020. The LR1 TC8 route (Middle East Gulf to UK-Cont) pays currently USD 102,274/day, exceeding even late April’s 2020 highs. Finally, the LR2 TC20-TCE route (Middle East Gulf to UK Cont) is paying USD 121,520/day”.

According to the shipbroker, “the Middle East crisis has not only driven north the freight rates but also the bunker prices. Prices for very low sulfur fuel oil in Singapore are surging rapidly, driven by robust demand from shipowners topping up their vessels’ fuel tanks to maximum capacity in anticipation of rerouting around the Cape of Good Hope. VLSFO bunker price in Singapore is now trading at USD 655/mt, a 10% increase compared to mid-January’s 2024 prices. Oil prices are also following the upward trajectory, with WTI and Brent climbing to USD 78/barrel and USD 83.5/barrel respectively, achieving a second consecutive week of gains and reaching the highest level in nearly two months.

The oil price surge was caused by a combination of factors, including strong economic growth in the US, positive signals of Chinese stimulus, and concerns about oil supply from the Middle East. The United States, expanding at an impressive annualized rate of 3.3% in the last quarter of 2023, defied recessionary fears. Meanwhile, the central bank of China significantly reduced bank reserves and infused approximately $140 billion into the banking system, bolstering demand. Additionally, concerns about supply disruptions from the Middle East have provided further support.

Xclusiv concluded that “tn the dry bulk market, an increased number of grain-carrying ships have been diverting around the Cape of Good Hope instead of passing through the Suez Canal, due to recent attacks on vessels in the Red Sea. This trend has resulted in approximately 3.9 million tons of grain cargoes taking alternative routes, a significant number considering that around 7.7 million tons of grain cargoes transit the Suez Canal into the Red Sea each month. In the meantime, Ukraine has managed to boost its Black Sea grain exports to a level not seen since before Russia’s invasion. Kyiv’s achievement in replacing an UN-backed Black Sea export deal with its own shipping scheme has brought relief to Ukrainian farmers and importing countries”.

Nikos Roussanoglou, Hellenic Shipping News Worldwide