Home / Shipping News / International Shipping News / Americas Aframax freight to remain near breakeven levels until H2

Americas Aframax freight to remain near breakeven levels until H2

Americas Aframax freight rates are expected to remain near breakeven levels during the first half of 2021, under downward pressure until a widespread deployment of the coronavirus vaccine revives refinery runs, bolstering demand for waterborne crude imports.

“At the minimum, the first six months rates will be pretty poor. It’s going to take a long time before demand picks up,” a shipowner said.

Freight for the benchmark Aframax USGC-UK Continent route fell from an average of $45.44/mt in January to $8.57/mt in October, before bouncing back to $16.3/mt and $13.96/mt in November and December, respectively. The move higher was driven by short-covering ahead of the holidays and refiners looking to clear end-year stocks, according to market sources.

Although momentary spikes are expected throughout H1 2021, market participants do not believe Aframax freight will recover from recent lows until the second half of the year.

S&P Global Platts Analytics estimates freight for the 70,000 mt Caribbean-USGC route to reach an average of $11.2/mt in January 2021 amid weather-related delays at USGC ports, up from a November 2020 average of $7.41/mt. Platts Analytics expects the rate to recover to $11.43/mt in December 2021.

Pandemic hampers lightering activity

Spot USGC Aframax lightering market activity was hampered by a pandemic-driven drop in crude exports since April 2020, with the cost of a full 500,000-barrel three-day lightering service averaging lump sum $225,258 between July and the first half of December, down 25% from the same period in 2019, and 45% down from H1 2020 rates, Platts data shows. Ship-to-ship service providers do not expect demand to pick up considerably within the first half of 2021.

“I think lightering rates are going to be pretty much flat from where [they are],” a source familiar with lightering operations said. “I believe US crude production is poised to remain flat for 2021; I don’t see much pushing demand.”

The International Energy Agency in its Dec. 15 monthly oil market report said it expects 2021 oil demand to grow 5.7 million b/d after an 8.8 million b/d plunge in 2020. The IEA revised its 2021 demand estimate down by 170,000 b/d, reflecting low demand for petroleum products such as jet fuel and kerosene as global mobility remains limited by partial lockdowns.
Libyan crude output caps trans-Atlantic exports

Demand for US crude into Europe is likely to be capped by the return of Libyan crude production, limiting demand for trans-Atlantic Aframax voyages.

Libyan exports reached 1.24 million b/d in December, up from 843,000 b/d in November 2020, according to Platts’ trade flow software cFlow.

“Every million barrels coming out of Libya and going to Europe is diminishing the number of barrels from the USGC going to Europe,” a second shipowner said. “Aframax barrels from Libya are typically staying in the Med, which is a shorter ton-mile and is not considerably diminishing the tonnage list.”

Although shipowners anticipate small windows of opportunity during H2 2021, the “winter highs” in rates for that period are expected to be merely the lows of other years.

“January probably will still see better rates just because of the winter and volatility. Weather delays due to fog and delays in the Turkish straight will help keep rates a little higher,” a third shipowner said.

The Houston Ship Channel was closed due to fog and inclement weather for a total of 329 hours in the first three months of 2020, according to Platts data, and has so far seen a total of 45 hours of fog closures from November through mid-December 2020.
Source: Platts

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping