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Saudi Arabia vs the tanker market 4. June 2023 – RESEARCH

Saudi Arabia has been leading the OPEC+ cartel towards tightening the oil market lately, and after this weekend's meeting, it seems they have met the breaking point for the other members. Unfortunately for the tanker market, OPEC+ members agreed to extend their cut into 2024, in addition, Saudi Arabia introduced a one-month one-million-barrel cut starting in July, an attempt to push prices higher in the short term. Many suggest that OPEC+ has started exploiting its position and power to play monopoly hence a lot of focus has been directed to other areas like the USG export market, where shale oil producers should feel more confident in increasing production at this stage.

DPP/CRUDE: We saw some positive momentum in the VLCC market this week, which was needed after a previous stagnating week. The MEG market was steady with a small increase in volume, showing a consistent trend. Unfortunately, the WAF market did not follow through as expected this last week, giving the Suezmax segment a somewhat lackluster week as the MED market was simultaneously slower than usual. Not much help from the East, as the Suezmax segment had a globally down-trending week. Aframax activity in the MED looked somewhat stable, but with Libya cargoes mainly covered and not much other new business entering the space a natural correction was foreseen to happen. UKC Afra's also had to suffer from a correction after a slower week, but we expect that the market might start showing signs of improvement from next week as many ballasters left the area during this week.

CPP/PRODUCT: While it was a quiet week for the LR2s, the market was more or less unchanged although it seems obvious that the next fixtures will show signs of softening. The LR1 segment already made this clear as we have seen the first fixtures of below USD 3mill for WCI loadings heading west, overall, not the greatest week, and we could see further softening heading into the next. We have a good two weeks for the MRs, so maybe it's fair to have one bad, that might be the only way to justify this past week. The USG was not only slow for the crude tankers, but also MRs saw a volume drop, and unfortunately, it's becoming a trend for the USG market. As far as the East you can go the attitude does not get much better, as rates have been declining from Singapore up to North Asia as enquiries have been few. While Saudi Arabia has made their plans clear to drop crude production in July, we will see what impact the clean segment will experience, especially as the traveling season is upon us and jet fuel demand is expected to increase.

TIME CHARTER MARKET: Again, this week we saw a slight setback in the rates for multiple segments on the time charter market with crude tankers taking the harder hit while CPP tonnage managed to reduce the damage to minimal change. MR2 rates went back to $25,500 pd for a 1-year firm TC period being down 1.92% w-o-w. LR1 rates for a 1-year firm TC period settled at $38,000 pd being down 5% w-o-w. On the larger segments, we saw equally Aframax’s being down 5% having settled at $47,500 pd while VLCC’s took the hardest hit and fell 8.51% w-o-w and settled at $43,000 pd. The changes this week are a reaction to the uncertain spot market rates we have seen for the last couple of weeks but with a bounce back in the spot market this week we do not see the delayed effect to the time charter market being more severe. We continue to see longer periods being negotiated with up to 5 years being the max which is another factor suggesting that charterers and owners both want to lock in rates for longer periods and reduce the risks of volatility that we are seeing right now in the spot market slowly affecting the tc market. That being said, there are still a lot of risk-willing owners out there who do not even consider tc yet and still believe in reaping the profitable rates of the spot market with only one way to go – and that’s up! The reason for this is due to the lower availability of some of the key PG and Far East routes that have been affected by the new trade lanes taking away vessels and could just be the beginning of even more attractive rates in the mid-term outlook. We are for example seeing a myriad of vessels being taken out of the intra-PG, PG-Singapore, and Indian sub-continent trade and being employed in the Black Sea and Baltic trades.

SECOND-HAND MARKET: The asset market continues to be strong with Buyers willing to pay above last done to secure tonnage, but we are also seeing quite a few negotiations being done at below last done from Sellers who are cashing in and securing a sale while there are still elevated S&P activity and attractive prices to conclude at. The benchmarks this week remained unchanged for product tankers but saw some changes in the crude tankers with 5-year-old VLCC’s going down to $97m (-2.02$ w-o-w) adjusting to recent transactions and negotiations. 10-year-old suezmaxe’s saw a negative change as well being down 1.82% w-o-w and settling at $54m. On the Aframax side, we saw a positive change with 15-yearold Afra’s being up 2.78% w-o-w and settling at $37m. The purchase interest continues to be interesting enough for sellers to test the market and push prices upwards but with new buyers stepping in almost every week we do not see the demand to wear off anytime soon giving sellers and owners a great opportunity to continue trading while keeping a close eye on the asset prices. We are also seeing more deals now being negotiated and concluded with longer laycan stretching into late Q3 2023 suggesting that Buyers with longer laycans are in it for the long term and do not believe the market will decline in the short to mid-term outlook.

<img width="751" height="220" src="https://investornytt.no/wp-content/uploads/Screenshot-2023-06-08-152043.png" alt="" loading="lazy" srcset="https://investornytt.no/wp-content/uploads/Screenshot-2023-06-08-152043.png 751w, https://investornytt.no/wp-content/uploads/Screenshot-2023-06-08-152043-400x117.png 400w, https://investornytt.no/wp-content/uploads/Screenshot-2023-06-08-152043-600x176.png 600w" sizes="(max-width: 751px) 100vw, 751px" /> NEWBUILDING It was an active week on the newbuilding side this week with a dozen vessels being contracted for mainly unknown buyers for now. Starting on the larger sizes it was reported that a private Buyer contracted two 158,000 DWT Suezmax tankers at Samsung Heavy Industries which are expected to be delivered during late 2025 and early 2026. CMES Shipping secured two 115,000 DWT LR2 tankers at CSSC Dalian which are slated for delivery during the first half of 2026. K Shipbuilding reported this week that a private Greek buyer contracted two 50,000 DWT MR2 tankers which are expected to be delivered in early 2025. Another private buyer secured two 37,000 DWT Handysize tankers at Hyundai Mipo which are expected to be delivered in Q1 2025. Finally, Tune Chemical Tankers ordered two firm and two optional STST 16,000 DWT Chemical Tankers at Tersan Shipyard in Turkey. The vessels will be fitted with Methanol dual-fuel propulsion and the two firm vessels are expected to be delivered in early 2025.

RECYCLING Another silent week with little to no activity and we do not blame the owners as the tanker market in all segments continues to be well above profitable and there is no outlook for tanker owners to sell for scrap anytime soon. Whilst the tanker market is strong and profitable, the raw production of steel worldwide dropped a staggering 3.7 million metric tonnes (2.3%) from March to April. Rates kept relatively steady this week with Turkey tanker rates going up 3% and settling at $340/ldt and Bangladesh going up 2.8% and settling at $545/ldt. India remained stable at $500/ldt while Pakistan continue to struggle with national matters affecting the recycling yards.

Disclaimer OCEAN EXL FZCO & OCEANEXL TRADING L.L.C. No information in this report constitutes financial advice or other advice or any recommendation to take actions hereupon. No representation, warranty, or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in this report by OCEAN EXL FZCO & OCEANEXL TRADING L.L.C or any of its members or employees, and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions. × Avvis varsel

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