Intermodal Weekly Market Report

By Chara Georgousi and Fotis Kanatas

In a week characterized by a 1.8% drop in Brent crude prices and a slight 0.1% uptick in WTI, conflicting viewpoints on the trajectory of global oil demand have come to the forefront. The International Energy Agency (IEA) has offered a starkly different analysis compared to OPEC in its latest World Energy Outlook. According to the IEA, the demand for oil, natural gas, and coal is set to peak within this decade under existing governmental policies. This marks a groundbreaking shift in projections, considering that it's the first time such an outlook has been articulated. On the other hand, OPEC insists that the global thirst for oil will not only persist but intensify past 2030, necessitating substantial investments in the sector to the tune of trillions of dollars.

These opposing perspectives emerge in a backdrop of ongoing challenges within the oil industry, including geopolitical crises that have a depressive effect on both oil prices and production. More specifically, escalating tensions between Israel and Palestine have stoked concerns about a ripple effect disrupting global oil supply. The situation carries the risk of involving Iran and its allies in the region, broadening the scope and scale of the conflict. Adding another layer of complexity are military interventions by the United States in the Middle East, coupled with recent army drills conducted by Iran. These developments signal that an expanded conflict could significantly impact oil markets in ways that are difficult to predict.

Taking a closer look at the Mediterranean, we can see that since the start of hostilities in the Middle East on 7 October, freight rates for both dirty and clean tankers have soared. In particular, the TD6 TCE, which follows Suezmaxes from the Black Sea to the Mediterranean, has risen by 631% to $77,999/day on 30 October, while the TD19 Cross Mediterranean (Ceyhan to Lavera) for LR1s has risen by 336%, with spot rates of $81,530/day. The surge in dirty tanker activity in the region is a combination of a seasonal increase in demand for crude oil, firm refining margins, which are expected to increase with the onset of winter, and the wartime premium. Owners are currently enjoying high rates and the coming months look strong for them as more vessels are expected to carry Venezuelan oil after the temporary lifting of the ban, leaving a shortage of vessels in the region.

On the clean trade, the TC15, which tracks LR1s loading in the Mediterranean and heading to the Far East, was up a modest 27%, while the Cross Med TC6 was up 109% to $8,369/day and $25,959/day respectively. Adding further fuel to the rally, European refined product inventories are once again on the decline, approaching 5 year lows, meaning that stockpiling efforts are likely to push freight rates higher.