Key takeaways from this report:
Dirty – East of Suez: Rising Canada to Asia flows by TMX expansion, Aframax repositing leads to regional freight tightening
Clean – East of Suez: MEG CPP voyages to Wider Europe through Bab-El-Mandeb see a slight pickup while COGH voyages decline
Dirty – West of Suez: Jan-10 OFAC sanctions prove effective, slashing the tonnage availability for lifting Russian crude
Clean – West of Suez: TC2 earnings overtake TC14, with further upside on the horizon
Dirty – East of Suez: Rising Canada to Asia flows by TMX expansion, Aframax repositing leads to regional freight tightening
The TMX pipeline expansion is driving an increase in Aframax voyages from Canada, with more shipments heading to Asian countries
➔ While exports to the United States are decreasing, Asia is becoming the primary destination for Canadian crude
➔ Since June 2024, STS voyages discharging at the Pacific Lightering Zone have been steadily decreasing
➔ Dirty tanker rates on the Vancouver-to-China route hit their highest level since September 2024, rising from 30 $/t to 37.5 $/t in February 2025 (Argus)
➔ Evolving US tariff situation are likely to reinforce this shift towards Asia, further strengthening the trade pattern
A consistent group of Aframax vessels is engaged in a repeating cycle, loading in Canada and discharging in Asia before returning to Canada for the next voyage
➔ 9 vessels are ballasting from the Pacific to Canada West Coast, with more expected to join this trade route as activity grows
➔ A tighter tonnage supply in Asia-Pacific could lead to higher Aframax freight rates in the region
Clean – East of Suez: MEG CPP voyages to Wider Europe through Bab-El-Mandeb see a slight pickup while COGH voyages decline
One of the key indicators of the resumption of oil flows through the BabEl-Mandeb is a substantial boost in CPP flows
➔ Middle East Gulf (MEG) to Wider Europe CPP voyages via the Bab-El-Mandeb (BEM) transit increased slightly since late Dec
➔ However, the voyages are still significantly lower vs 2023 as 1H Feb CPP flows from MEG to Wider Europe via the BEM are only around 110kbd or 16% of 2023 average volumes
➔ High risk insurance premiums and shipowners remaining risk averse to Red Sea transits continue to keep BEM transits low
Drop in MEG to Wider Europe CPP flows has weighed on COGH voyages
➔ Weak arbitrage economics to send middle distillates from MEG to Wider Europe reduced the share of exports to the region from 15% in Sept last year to 9% in 1H Feb
➔ The reduction in CPP MEG exports to Wider Europe has reduced tonne-mile demand for this route
➔ Continued weak CPP arbitrage flows for this route or the resumption of oil flows via the BEM may hamper clean tanker freight rates (TC8 and TC20)
Dirty – East of Suez: India diversifying its crude purchase to replace Russian barrels
10-Jan OFAC sanctions have effectively sidelined the 155 crude oil tankers from engaging in further Russian trade
➔ Idling behaviour off laden vessels is reflected in the sharp decline in distance travelled, and further evidenced by the accumulation of Russian crude sitting still on these vessels
➔ 7 laden vessels have been stranded offshore Russia Far East, as they could likely await for STS operations to discharge
➔ Likewise, the plummeting voyage distance of ballast vessels point towards a struggle in securing employment, as market players remain compliant to OFAC sanctions enforcement
While the near-term effectiveness of OFAC sanctions in slashing tonnage availability for Russian crude exports, this trade could likely be made attractive again if further discounts to Russian barrels rejuvenate demand from China and India
➔ New entries to the Russian-trading fleet likely to arrive sooner rather than later, with S&P of as many as 20 Western-operated Aframaxes aged 14+ years (Lloyd’s List)
Clean – West of Suez: TC2 earnings overtake TC14, with further upside on the horizon
TC2 earnings have consistently surpassed TC14 earnings for the first time since this summer,” restoring” normality on TC2 as the traditional front-haul in the Atlantic Basin
There are drivers which could continue support MRs out of Europe at the expense of the US Gulf in the short-term:
➔ Limited MR prompt availability in Europe due to healthy Russian diesel voyages out of the Baltic alleviating supply
➔ MR ballasters heading to Europe after discharging in PADD 1 is quite sparse, limiting competition in Europe
➔ Instead, MRs migrated to the US Gulf, pressuring freight rates downwards within the region
➔ Prospective US tariffs on Canada could support TC2 as US will likely turn to Europe for gasoline replacement supplies
➔ Impending USG refinery maintenance will further soften MR support on diesel transatlantic voyages TC14
Data Source: Vortexa