2024.07.30

VLCC Spot Rates Recover as Shipowners Collaborate

The VLCC (Very Large Crude Carrier) market has seen a notable improvement this week, driven by increased rates from the Middle East Gulf to China. Rates have risen by 35% over the week and 16% for the month, reaching $33,800 per day. This rise marks a recovery from recent market lows, with peak rates hitting $36,100. The average year-to-date VLCC rate is $42,000 per day, lower than 2023's $51,200 per day. The Middle East Gulf to China route experienced a significant rate increase to WS 54.5 despite a slowdown in inquiries towards the week's end. The rate for a 270,000-tonne trip on this route climbed to WS 58.8, equating to a $36,358 daily time charter equivalent.

Fearnleys Securities noted a rapid dissipation of market gloom, with a 40% rate improvement and potential for WS 60's rates. Owners have been aiding each other, leaking deals to warm the market. A temporary Chinese freeze on early August laycans and profit-taking on prompt dates are anticipated. Currently, only 27 vessels are free of cargo in the East. In the Atlantic, rates for 260,000 tonnes from West Africa to China increased to WS 59.83, and for 270,000 tonnes from the US Gulf to China, rates rose to $7,460,000 ($33,789 per day). Despite this, Clarksons warns of potential rate softening as sentiment weakens with minimal Atlantic market support.

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Sanctioned Oil Tanker Charts Russia’s Arctic Route to China

The 118,000-dwt oil tanker Viktor Bakaev, sanctioned by the US, is headed to China via the Northern Sea Route (NSR), demonstrating Russia’s use of blacklisted vessels. Currently off Norway's northern coast, the tanker is destined for Zhoushan, China, carrying Russian Urals crude loaded in Primorsk. This marks the first sanctioned tanker to use the NSR, a strategic route for Russia due to shorter voyage times to China and India and disruptions in the Red Sea caused by Houthi attacks.

The NSR's appeal has grown despite its risks, enhanced by receding sea ice from global warming. Russian LNG producer Novatek has already started using the NSR this summer. While the MSC Group avoids the route due to environmental concerns, most of the 40 sanctioned vessels struggle with normal trade due to US sanctions, leading Russia to rename, reflag, and reinsure these ships.

The Viktor Bakaev, sanctioned since December, is the fourth US-sanctioned ship to carry a cargo of Urals crude, set to arrive in Zhoushan on August 19. The UK and EU have followed the US in sanctioning vessels, with 63 tankers now targeted. Another sanctioned vessel, Fighter Two, recently loaded crude in the Black Sea and is stopped near Turkey’s Bosphorus Strait.

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Iran Seizes Tanker with Smuggled Crude in Gulf, Reports Tasnim

Iran has seized the Togo-flagged tanker Pearl G in the Gulf, which was found carrying 700,000 liters of smuggled Iranian crude oil, according to Tehran's semi-official Tasnim news agency. The vessel, owned by an Iraqi national residing in the UAE, was reportedly offloading smuggled oil from Iranian vessels and has been moved to the port of Bandar Imam Khomeini. Iran, dealing with rampant fuel smuggling due to subsidies and currency devaluation, has intensified its crackdown on such activities. Tracking data shows the Pearl G had been operating between Sharjah, UAE, and Iraq over the past 90 days. The tanker, managed by Jinsung Marine Service Co Ltd and crewed by nine Indians, was seized under a judicial order. This follows the recent seizure by Iran's Islamic Revolutionary Guard Corps of another Togo-flagged tanker carrying 1,500 tons of marine gas oil.

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Nigeria Approves Naira for Crude Sales to Ease Forex Pressure, Boost Dangote Refinery

Nigeria has authorized state oil company NNPC Ltd to sell crude oil in the local currency, naira, to the Dangote refinery, effective immediately. This move aims to alleviate foreign exchange pressure. The $20 billion Dangote refinery, Africa's largest, began production in January but has struggled to secure enough crude to meet its 650,000-barrel-per-day capacity due to reliance on expensive imports. Oil majors had previously blocked access to local crude by selling it above market price or claiming unavailability.

Zacch Adedeji, chairman of Nigeria's Federal Inland Revenue Service, announced that the new policy allows NNPC Ltd to sell crude to Dangote and other local refineries in naira. This decision is expected to reduce foreign exchange demand by $7.32 billion annually, cutting the monthly forex burden from $660 million to $50 million. The policy also enables refineries to sell refined fuels to local marketers in naira.

Nigeria has faced chronic dollar shortages, leading to naira devaluations twice in the past year. Analysts believe this decision will reduce the need for foreign loans and lower transportation costs for refineries. Local fuel marketers had expressed concerns about paying for supplies in dollars once the Dangote refinery starts producing gasoline next month. The new arrangement follows a recent agreement between Nigeria's oil regulator and producers to sell crude oil to domestic refiners at market prices, resolving a supply dispute.

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US Finalizes Purchase of 4.65 Million Barrels for Strategic Petroleum Reserve Refill

The U.S. Department of Energy (DOE) has finalized a contract to buy 4.65 million barrels of crude oil for the Strategic Petroleum Reserve (SPR). The oil will be delivered to the Bayou Choctaw site in Louisiana during the last quarter of the year. Exxon Mobil will supply 3.9 million barrels, with the remaining amount provided by Macquarie Commodities Trading US LLC. The average purchase price is about $76.92 per barrel.

This purchase is part of ongoing efforts to replenish the SPR after a record 180 million barrels were released in 2022 to manage soaring gasoline prices following Russia’s invasion of Ukraine. The SPR was reduced to its lowest level in 40 years due to this release. Since then, the DOE has repurchased 43.25 million barrels at an average price of around $77 per barrel, compared to the $95 per barrel at which the oil was sold in 2022.

Additionally, the DOE has worked with Congress to cancel a planned sale of 140 million barrels, which the department considers as part of the refilling effort. Energy Secretary Jennifer Granholm highlighted that the repurchase is a "good deal for taxpayers" and ensures the readiness of the SPR.

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Fredriksen and Trafigura's TFG Marine Orders Methanol-Ready Bunker Tankers

Bunkering joint venture TFG Marine, supported by John Fredriksen and Trafigura, has partnered with Singapore's Consort Bunkers to build and charter four 6,500-dwt methanol-ready bunker tankers. The first vessel will be completed later this year at China Merchants Jinling Shipyard. TFG Marine's global head of bunkering, Kenneth Dam, emphasized the company's commitment to modernizing its fleet with these low-carbon fuel-capable ships, which align with decarbonization goals.

The new tankers will be equipped to supply a range of fuels, including high-sulphur fuel oil, very low-sulphur fuel oil, marine gasoil, biofuels, and future liquid methanol. This initiative is in anticipation of Singapore’s upcoming methanol bunkering licensing framework. TFG Marine, established in 2020 as a joint venture between Trafigura, Frontline, and Golden Ocean, operates in 35 hubs worldwide.

This order follows a previous deal with Fratelli Cosulich Group for an 8,000-dwt vessel and the acquisition of Spanish bunker supplier Vilma Oil, expanding TFG’s reach into the western Mediterranean Sea.