Dirty Oil Flows to China

The flow of tonnes of dirty oil to China from global sources has seen a notable downturn, particularly impacting the Russian Federation, which has experienced a consistent decline since the first quarter of the year.

As May began, signs of improvement emerged in the VLCC MEG-China route, contrasting with the persistently subdued sentiment in the Aframax Med route. Examining the demand side and the growth of tonne days, a consistent deceleration persists, posing ongoing challenges to sentiment in the crude oil freight market, especially as vessel counts have recently dipped below the annual average trend for VLCC Ras Tanura. The recent period of tight supply in the VLCC Ras Tanura appears to have buoyed freight market sentiment temporarily, but the demand outlook remains uncertain. April concluded with a decline in the monthly volume of tonnes for Chinese crude oil imports, and May’s indicators are not encouraging, with the 14-day moving average of dirty oil flows from all origin countries to China fluctuating significantly below last year’s levels. Meanwhile, Saudi Arabia has recorded its lowest levels since the beginning of the year.

SECTION 1/ FREIGHT

Market Rates (WS)

‘Dirty’ WS – Steady​
VLCC – Suezmax – Aframax

As May unfolds, the sentiment surrounding crude oil market price trends appears stable. Nevertheless, the VLCC MEG-China route has seen a significant annual increase, standing out amidst this apparent stability.

The VLCC MEG-China freight rates rose above 65WS, indicating a significant 40% annual increase compared to a similar week in May last year. Still, it’s tough for the market to return to the high levels of 70WS seen in mid-February since the growth of VLCC tonne days continues to decrease.

Suezmax freight rates for shipments originating from West Africa to continental Europe have maintained a level above 100WS since the end of April, indicating a 10% annual increase. In the Suez Baltic Med route, rates are now standing above 110WS, almost 2% higher than a month ago.

Aframax Med freight rates are currently hovering around xs WS160, marking a drop of nearly 20 points since the end of April. It remains uncertain whether the market will revisit its peak at the end of January, when rates surged past WS200.

‘Product’ WS

LR2 Steady

LR2 AG freight rates sustained levels above WS200 from mid-April, currently standing 40% higher than during a comparable week a year ago.

LR1 Steady

Panamax Carib-to-USG rates sustained levels around WS190 from mid April, currently standing 4% weaker than during a comparable week a year ago.

‘Clean’

MR Firmer

MR1 rates for shipments from the Baltic continent hover above 240WS, reflecting a similar sentiment of the rates observed a month ago. Meanwhile, MR2 rates for shipments from the continent to the USAC stood above 180WS, marking a 20% increase compared to rates observed a month ago.

SECTION 2/ SUPPLY

‘Dirty’ (# vessels) – Mixed

The supply trend for crude tankers is showing a downward trajectory in the VLCC Ras Tanura and Suez WAfr segments, while an upward trend appears to persist for the Aframax Primosk segment.

VLCC Ras Tanura: The number of ships has dropped to 55 and there seems to be a downward trend over the next few days, with the last peak being reached four weeks ago when the number was more than 60.

Suezmax Wafr: The current ship count is now less than 60, marking a reversal from the upward trend observed at week 15.

Aframax Primorsk: The number of ships reached a high of 40 at the beginning of the week, an increase of almost 80% on the low in week 15.

Aframax Med Novo: The vessel count has persisted below the annual average of 10 since the end of week 17, indicating a continuing downward trend.

‘Clean’

LR2 (#vessels) – Decreasing

MR (#vessels) – Mixed

Clean LR2 AG Jubail: The upward trend has undergone a significant revision in the last four weeks, with current levels now falling below 5 for the first time since the end of week 11.
Clean MR: Vessel activity for MR1 at Algeria’s Skikda port rose to almost the annual average, reaching around 35 ships at the beginning of the week before falling to less than 30 ships in the middle of the week. Contrary to the increase seen in MR1 Algeria, the MR2 Amsterdam recorded a notable constant decrease since the end of week 15 by falling lately to 22 vessels.

SECTION 3/ DEMAND (Tonne Days)

​​‘Dirty’ Decreasing

Dirty tonne days:The declining trend observed in April continued into early May for the dirty tonne days growth, particularly noteworthy in the VLCC segment which reached one of its lowest points since week 45 last year. While there are indications of improvement in the Suezmax segment compared to the previous low point at the end of week 15, the Aframax segment continues to experience a diminishing pace of growth, showing no signs yet of an upward trajectory.

‘Clean’ Decreasing

Panamax tonne days: The initial days of May mirror the declining growth trend observed two weeks prior, with the most recent peak noted at the conclusion of week 13. Clean MR tonne days: Over the past eleven weeks, the tonne-day growth for both MR1 and MR2 vessel sizes has remained consistently on a downward trajectory, showing no signs of an imminent reversal.
Source: By Maria Bertzeletou, Signal Group, https://go.signalocean.com/e/983831/Account-Login/2q5v9h/406887554/h/eDaMSOZxcOUw–5jKPyepk2jPm4ZIYqNdQaErBc0OKk