Supertankers Correct from the Extremes, but the Floor Is Firm

The VLCC market spent the past week retreating from record highs, but it has not softened by much. Lloyd’s List describes crude tankers as in correction after the Hormuz-driven “super spike”, with spot rates still at levels unheard of before the crisis and no floor yet found. Clarksons reported VLCC spot earnings down almost 25% on the week to $541,000/day for eco-scrubber units. Braemar research has US Gulf-China at $452k/day, down from a $638k/day peak two weeks ago, and Gulf of Oman-China down from $913k/day to $657k/day.

The main driver is demand destruction on long-haul Atlantic voyages. Clarksons notes that November US crude bookings to Asia are running at about half of last month’s volume. Moving crude east on a VLCC costs roughly $29/bbl from the US Gulf to China, against $15.6/bbl from the Gulf of Oman and about $15/bbl for the same volume on three Aframaxes to Europe. TradeWinds reports that traders are switching to smaller tankers for US exports as VLCC costs become prohibitive. Asian refiners are leaning on shorter-haul Middle East barrels, which is bearish for tonne-miles.

This story was originally published by Breakwave Advisors. Read the full story at Breakwave Advisors →