In this week's report we focus on the drivers behind the dynamics and expectations for the Suezmax market on both basins. We also give an update on MRs operating in China as well as the recent developments on supertanker clean-ups.
Key takeaways from this report:
Dirty – East of Suez: MEG Suezmax demand in the doldrums but rates supported from limited tonnage and demand from the East
Clean – East of Suez: China-Americas WC gasoline arb supports MR tonne-miles, but ex-China utilisation remain subdued
Dirty – West of Suez: Seasonal uptick in WAf Suezmax demand imminent, but it could be capped by Dangote consumption
Clean – West of Suez: Supertankers clean up update; mixed bag of behaviours from operators once CPP is discharged
Dirty – East of Suez: MEG Suezmax demand in the doldrums but rates supported from limited tonnage and demand from the East
Suezmax tonne-day demand out of the Middle East Gulf remains at multi-year lows predominantly influenced by Red Sea attacks which has limited East-to-West crude flows.
A slight pick-up on Suezmax employment towards the Pacific Basin has provided a floor on the the segment’s demand out the MEG
Tonne-day share of MEG Suezmax loadings towards the Pacific Basin has rebounded to 57%, the highest recorded since the start of June
Despite softer demand fundamentals, Suezmax availability in the Middle East continues to drop since the end of July, providing a support in rates in August, following a drop to yearly-lows
MEG-to-India and MEG-to-SE Asia Suezmax rates have risen around 15% over the past two weeks (Argus)
However, as the Indian monsoon season is underway, demand for crude imports might soften, capping the potential of any considerable freight rate increase
Clean – East of Suez: China-Americas WC gasoline arb supports MR tonne-miles, but ex-China utilisation remain subdued
China-Americas West Coast MR tonne-mile demand surged in August due to favourable gasoline arbitrage
Four MR2-size gasoline cargoes departed China for Mexico and Chile between August 1-20, boosting China’s gasoline exports to the Americas West Coast to nearly 60kbd for the month, the highest level since July 2019
In contrast, China’s gasoline exports to Asia remained flat month-on-month during the same period, as Asian cracks softened in recent weeks
While MR tonne-miles found support from long-haul routes, overall exChina MR tonne-miles held steady to lower in August due to capped Chinese CPP exports
Looking ahead, China’s CPP exports are likely to pick up in the coming months, driven by seasonally stronger production and additional export quotas
However, these additional exports will likely remain within Asia due to narrowing arbitrage opportunities, limiting MR tonne-mile growth
Dirty – West of Suez: Seasonal uptick in WAf Suezmax demand imminent, but it could be capped by Dangote consumption
Suezmax utilisation out of the Gulf of Mexico was high early in August, but then tumbled as the number of crude loadings to Europe on Suezmaxes declined, as the month progressed
Additionally, Suezmax utilisation in South America East Coast and the Med remains below H1-levels, which could change as no VLCCs can load from Guyana currently due to seasonal restrictions
The Atlantic Basin region poised for increased Suezmax demand is West Africa
This increase in demand presages the seasonal uptick in demand out of WAf expected in early Sep as European crude demand increases in Q4
Especially with the ongoing issues of light-sweet Libyan crude surrounding the field outage, Europe may increasingly look to WAf as a source of light-sweet crude in addition to WTI
However, higher crude demand from the Dangote refinery as it continues to increase production could provide a ceiling to the usual seasonal uptick in Suezmax demand expected at this time of year
Clean – West of Suez: Supertankers clean up update; mixed bag of behaviours from operators once CPP is discharged
We have recorded six additional tankers that have followed the supertanker clean up trend for August: 4 VLCCs and 2 Suezmax tankers
This is considerably down from the 15 vessels recorded cleaning up in July
This brings the total of VLCC and Suezmax tankers cleaning up to 34
There is a mixed bag of behaviour after these vessels discharge the clean cargoes:
4 tankers continued with loading a consecutive CPP cargo, whilst 7 tankers have switched back to dirty after one load
In order to raise profitability a portion of operators carried condensate from Algeria after discharging in Europe to reduce the ballast leg mileage
2 of the oldest tankers have converted to an FSO behaviour, potentially could be used to store, compile and blend off-spec diesel
Data Source: Vortexa