VLCC freight rates from the Mideast Gulf to China fell by 20pc on 24 June as a ceasefire between Israel and Iran appeared to hold, easing geopolitical tensions and raising the prospect of further declines.
Market participants said rates could fall quickly in the coming days if the ceasefire continues, and suggested that shipowners are likely to rush back to secure cargoes before rates drop further.
The bellwether Mideast Gulf–China VLCC rate dropped to WS87.5 ($20.44/t) on Tuesday, down from a 2.5-year high of WS110 ($25/t) the previous day. Fixtures agreed at the peak of the market failed to hold. Kuwait's state-owned KPC had two bookings — one at WS110 and another at WS120 — fall through on Tuesday.
Monday's rate surge prompted some shipowners to hold back from fixing in hopes of even higher returns. Those owners may now return to the market to secure cargoes before rates fall further, adding to the downward pressure, market participants said.
Rates could return to pre-conflict levels if the ceasefire holds. Before tensions escalated on 13 June, the Mideast Gulf–China route had fallen to near year-to-date lows as Chinese crude demand weakened during refinery maintenance season. Higher official formula prices for Saudi crude exports also curbed demand from Chinese buyers, who turned to alternative suppliers in Latin America.
In a similar pattern in October last year, when Iran launched more than 200 missiles at Israel, the Mideast Gulf–China rate rose by over 13pc to $14.10/t in three days, according to Argus assessments. Rates eased back to just above pre-conflict levels after that round of hostilities de-escalated.
