Heightened European demand for crude has led to a surge in Suezmax shipping fixtures, lifting rates from west Africa, Brazil and the US Gulf coast to their highest levels since the first half of the year.
Cargo demand in west Africa sparked the rally and ate into Atlantic basin tonnage, lifting the rate to $3.68/bl for Bonny Light on 25 October – its highest level since June. The momentum carried over to the US Gulf coast, where the US-Europe 145,000t rate leapt to a five-month high of $3.92/bl for WTI on 25 October from $3.07/bl two days prior.
Brazil-Europe Suezmax rates also rose, to $4.02/bl for Tupi, the highest level since early April.
The gains have propelled Suezmax owners' daily earnings higher. Nordic American Tankers, which owns a fleet of 20 Suezmaxes, reported earnings ranging from $40,000/d to $70,000/d on 25 October, on operating costs of about $9,000/d per ship. The time-charter equivalent (TCE) rate, which reflects daily earnings for shipowners, for a scrubber-fitted Suezmax on a Houston-Rotterdam voyage was $68,426 on 25 October, up from $45,293/d on 23 October and a loss of almost $2,000/d a month prior, according to Argus data.
For now, a comparatively sluggish market for very large crude carriers (VLCCs) is unlikely to cannibalize the smaller Suezmax market, according to shipbroker Fearnleys. The current Suezmax fixing window in west Africa and US Gulf is for mid-November, compared with late November and early December for VLCCs.
Suezmax rates could receive additional support if European demand for Venezuelan crude materializes amid a tight global supply of sour crude owing to Opec+ production cuts and sanctions on Russian oil. The US temporarily lifted sanctions on the South American country's energy sector on 18 October.
But owners repositioning their vessels from the Mideast Gulf to the Atlantic amid a relative lack of Basrah cargoes for mid-November, and to capitalize on higher earnings, could add some downward pressure.
European demand for west African grades also appears to be cooling with several November-loading cargoes unsold. Some estimate that as much as half of the entire Nigerian export program — consisting of at least 48 cargoes — remains unsold. Nigeria accounts for roughly two-thirds of European imports of west African crude, mostly on Suezmaxes. Appetite for the country's oil in Europe is now under pressure from a combination of factors including the backwardation of the Dated benchmark, a fall in refining margins, and high freight costs.
