Cross-UKC Aframax freight rate hits YTD high amid North Sea tonnage crunch
Aframax dirty tanker freight rates for cross UK-Continent voyages rose sharply on the day Oct. 23, with market sources citing a tightening tonnage list, increasingly confident owner ideas and the knock-on effect from the recent strengthening of the Mediterranean market.
Platts, part of S&P Global Commodity Insights, assessed wet freight on the 80,000 mt UKC-UKC route at w210, or $19.59/mt, on Oct. 23. This represents a jump of w50 from its rate of w160, or $14.93/mt, on Oct. 20, and of w112.5 from its rate of w97.5, or $9.10/mt, two weeks ago on Oct. 9.
The cross-UKC Aframax market had been consistently firming over the last two weeks, with the last-done fixture during this period reported at w157.5 on Oct. 20. There was also talk of a fixture being agreed at around the w180 level, but this could not be confirmed.
However, it was at midday Oct. 23 that the market sprang into action in earnest, when it was reported that Equinor had placed the STI Lombard on subjects for an 80,000 mt cargo loading in the west coast of Norway and discharging in the UK-Continent, off an Oct. 29 laycan, at w210. The demurrage rate was agreed at $75,000/d.
Dearth of North Sea Aframax tonnage
Market sources primarily attributed the sudden spike in rates to a major contraction of the available supply of vessels in the North Sea region.
“[Tonnage] lists are very tight, people were talking the market up last week, but I didn’t expect things to go up by that much,” a UK-based Aframax broker said.
“The majority of the ships that are in the Baltic are willing to do premium [ex-Russia] business, which means there are fewer ships for the mainstream trade [in the North Sea],” a Europe-based Aframax broker said.
Most Western charterers are unwilling to fix voyages with vessels with a history of transporting Russian-origin crude oil since the outbreak of the Russia-Ukraine war in February 2022. This also became illegal in Western countries in July, when the price of the Urals grade of Russian oil exceeded the $60/d price cap set by the G7 and the EU.
A second UK-based Aframax broker said he thought the next fixture could be agreed at an even higher rate, pointing to BP receiving offers at very high levels from the few owners with suitable vessels near the North Sea area.
A second Europe-based broker also pointed to the recent spike in the Mediterranean Aframax market as a reason for firming sentiment for cross-UKC voyages.
“I can see five vessels looking for Russian trade — this is bound to take away tonnage from the North Sea, which is finally playing catch up to the Med market,” the broker said.
Platts assessed dirty freight on the 80,000 mt Ceyhan route at w212.5, or $22.14/mt, on Oct. 23. This represents an increase of w105 from its rate of w107.5, or $11.2/mt, two weeks ago on Oct.9.