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Bullish Tanker Market Makes it Harder to Spot Potential Downward Risk

The tanker market’s bullish nature lately, is making it harder to spot potential downward trends. In its latest weekly report, shipbroker Allied said that “a closer look at the TD3C route (MEG/China) could help us argue that trend patterns look fairly consistent with those being noted in other size segments and types of trade (i.e. LR2 TC20 analysis a couple of weeks back). Year-to-date, this route indicates less upward potential too, as the short-term spikes being noted periodically have met lower resistance levels at the same time. Around 2 loadings per day above current mean of trailing 6-month (mid Dec ‘23—mid May ‘24) range of weekly average of daily loadings did stimulate the Feb ‘24 brief rally, while the later 2 peak levels that took place, this excess number of loadings was roughly halved”.

According to the shipbroker “atypical” amassed activity can signal a surge in freight rates, especially if trading economics provide further room for this. This aggregated momentum across multiple dynamics is apparently hard to catch ahead of time. In the paper market, the market structure has strengthened since the latest portion of the previous month, with Q324 forward view, however, lagging some of the firm numbers that took place since year start”.

“On the other hand, Jun ’24 contracts hit some of the highest numbers a few days back, underscoring the market’s sensitivity in any form of bullish trend. At this point, amid a relatively strong market, the difficult aspect is when someone tries to assess downside risk. Lastly, while using VLCC trade flows technicals, the next anticipated freight price is also difficult to grasp at this point. The 21-day moving average of the loadings sum has improved, amidst the sluggish pace ahead of the holiday period (early May) in China. For the time being though, daily fixing activity prevails fairly volatile, hence, the recent upward mobility in earnings appears fragile as well. On the other hand, the current view of ballasters remains very tight for the immediate dates, that can provide an adequate support in freight figures amid a less liquid environment. However, the 21-day MA of total number of vessels in ballast may recover at the latest part of the month, and this could actually push stronger the decline for contracts with closer expiration dates. This will depend also on how domestic demand in the region will move, given the high needs for power generation during the summer period, a situation that can trim crude outflows. On separate note, the market may find support from heavy (and medium) sour grade arena, moving forward, especially if slower export volumes from Mexico do not meet some of the USGC demand in the near term”, Allied concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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