Tanker Market: A Mixed Bag in May

The tanker market was a mixed bag during the month of May. According to OPEC’s latest monthly report, dirty freight rates showed mixed movement in May. VLCCs experienced declines on all monitored routes, with Middle East-to-East spot freight rates falling 27% as long-haul tanker demand declined. Suezmax rates recovered some of the previous month’s losses, with rates on the USGC-to-Europe route increasing 35%. Aframax spot freight rates showed a strong performance on the US Gulf Coast, with rates on the Caribbeanto-US East Coast route, up 121%, while Mediterranean routes saw a mixed performance, with intra-Med rates up 2% and Mediterranean-to-Northwest Europe rates down 9%. Clean freight rates showed declines on all reported routes, with the strongest losses on West of Suez routes. Rates around the Mediterranean were down by about 44% while the Northwest Europe to US East Coast route declined 30%.

Spot fixtures
Latest estimates show global spot fixtures declined in May to average 12.98 mb/d. Fixtures dropped m-o-m by 1.4 mb/d, or almost 10%, with declines driven by lower volumes out of the Middle East. Compared with the previous year, spot fixtures fell 1.8 mb/d, or 12%.

OPEC spot fixtures fell in May by 0.7 mb/d, or over 7%, to average 9.1 mb/d. In comparison with the same month in 2022, fixtures were lower by 1.3 mb/d, or about 13%. Middle East-to-East fixtures declined by 1.1 mb/d, or over 18%, to average 4.8 mb/d. Compared with the same month of the previous year, eastward flows from the Middle East decreased 1.3 mb/d, or about 21%. Spot fixtures on the Middle East-to-West route also declined m-o-m in May, dropping by about 0.2 mb/d, or about 17%, to average around 1.1 mb/d. Y-o-y, fixtures were down by 0.5 mb/d, or almost 32%. Fixtures on routes outside the Middle East provided a bright spot, up 22% or 0.6 mb/d m-o-m to average 3.2 mb/d. Compared to the same month last year, fixtures on the route rose 0.4 mb/d, or around 16%.

Sailings and arrivals
OPEC sailings declined in May to average 22.2 mb/d. This represents a m-o-m drop of about 1.1 mb/d, or almost 5%. Y-o-y, OPEC sailings were down by about 0.4 mb/d, or less than 2%. Middle East sailings averaged 17.4 mb/d in May, representing a decline of 0.7 mb/d or about 4%. Y-o-y, sailings from the region increased by 0.6 mb/d, or close to 4%.

Crude arrivals rose on all monitored routes in May. North American arrivals saw a gain of 0.2 mb/d, or more than 2%, to average 9.4 mb/d. Y-o-y, arrivals in North America were 0.7 mb/d higher, or 8%. Arrivals in Europe increased by 0.2 mb/d, or about 2%, m-o-m to average 12.4 mb/d. However, compared to the same month last year, arrivals to Europe were 1.1 mb/d, or over 8% lower. Far East arrivals averaged 16.3 mb/d, representing a gain of 0.2 mb/d, or over 1%, compared with the previous month and around 2.4 mb/d, or about 17%, higher y-o-y. Arrivals in West Asia increased by 0.2 mb/d, or almost 3%, to average 8.6 mb/d. Y-o-y, arrivals in the region were up by 0.3 mb/d, or approaching 4%.

Dirty tanker freight rates

Very large crude carriers (VLCCs)
VLCC spot rates retreated further in May, down 27% compared to the previous month. However, y-o-y, VLCC rates were still up 19% on average. Lower volumes out of the Middle East weighed on VLCC values. On the Middle East-to-East route, rates fell m-o-m by 27% to average WS48 points. This was still 14% higher y-o-y. Rates on the Middle East-to-West route declined 25% m-o-m to average WS36 points. Y-o-y, rates on the route were still up 44%.

West Africa-to-East spot rates fell m-o-m by 26% to average WS49 points in May. Compared with the same month of 2022, rates were 11% higher.

Suezmax
Suezmax rates in May offset some of the previous month’s decline, gaining 18% m-o-m. Compared with the same month of the previous year, rates were 31% higher. Spot freight rates on the West Africa-to-USGC route increased by 4% m-o-m to average WS106 points. Y-o-y, rates were 28% higher.

Rates on the USGC-to-Europe route increased by 35% to average WS104 points. Compared with the same month of 2022, they were 33% higher.

Aframax
Aframax spot freight rates saw mixed movement in May, as strength on the Caribbean to US East Coast route offset weakness on East of Suez routes and out of the Mediterranean. On average, Aframax rates increased 16% in May. Compared with the same month of 2022, rates were 22% higher. Rates on the Indonesia-to-East route dropped 15% m-o-m to average WS154 in May. Compared with the same month last year, rates were 10% lower. In contrast, spot rates on the Caribbean-to-USEC route rebounded strongly, up 121%, to average WS256 points. Y-o-y, rates were 57% higher.

Cross-Med spot freight rates rose 2% m-o-m to average W179 points. This represented a 29% gain y-o-y. On the Mediterranean-to-Northwest Europe (NWE) route, rates fell a further 9% m-o-m to average WS157 points. Compared with the same month of 2022, rates were around 16% higher.

Clean tanker freight rates
Clean spot freight rates experienced declines across all reported routes, primarily driven by weakness in the West of Suez market. On average, rates fell 29% m-o-m and were down 49% compared with May 2022 levels.

Rates on the Middle East-to-East route declined by 16% m-o-m in May to average WS170. Y-o-y, rates were up 43%. Clean spot freight rates on the Singapore-to-East route fell 3% m-o-m to average WS235 and declined 30% compared with the same month of 2022. Spot freight rates on the NWE-to-USEC route declined by 30% m-o-m to average WS152 points in May, and were down 54% y-o-y. Rates for the Cross-Med route fell by 45% to average WS144 points, while rates on the Med-to-NWE route declined by 44% to average WS154 points. Compared with the same month of the previous year, rates delined 59% and 57%, respectively.

Nikos Roussanoglou, Hellenic Shipping News Worldwide