Surging suezmax rates from the US Gulf Coast to Europe have hit an 11-month high, overtaking the revenues for larger VLCCs heading East, according to analysts.
Europe-bound suezmax rates from West Africa, the Middle East and the US have more than doubled over the past month, owing to winter demand, said Argus Media.
Time charter equivalent earnings for scrubber-fitted suezmaxes from Houston, Texas to Rotterdam have increased from a loss of about $1,500 a day on 27 September to $80,000 per day just a month later, it added.
That compares with TCE rates for VLCCs from Corpus Christi, Texas to Ningbo, China, of just over $50,000 at the end of October.
London broker Howe Robinson said last week that VLCC owners were starting to look at muscling in on suezmax cargoes, which could put a ceiling on rates.
Rates for midsize tankers had been under pressure since July, when Russian crude topped the G7 price cap of $60 per barrel.
Western owners shipping Russian crude above that price would breach G7 sanctions, so they relocated tonnage to other trades in the Middle East Gulf, Mediterranean and Atlantic basin, giving charterers the option to push down prices.
“But winter crude demand has lifted the midsize market, with additional support from the longer voyages crude must travel compared to pre-sanction trade landscape,” said Tray Swanson, Americas freight pricing analyst for Argus.
Refinery maintenance in the US has made more oil available for export since September, he said.
VLCCs have been affected by Saudi production cuts of 1m barrels per day since July. VLCCs export nearly 90% of Saudi Arabia’s seaborne crude exports but its production is now at one of its lowest levels for years.
Vortexa reported last week that the driver for stronger suezmax rates was coming from West Africa to Europe. Aframaxes had been taking some of the volumes from the US Gulf Coast, it said.
The shipping team at Fearnley Securities on Monday reported freight rates for suezmaxes on West Africa to the UK continent and the Black Sea to Mediterranean routes up by nearly 600% on the month.
But Argus said the suezmax surge could wane, with owners repositioning their ships in the Atlantic to capitalise on the high earnings.
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