DPP Market Report: VLCCs in focus

VLCC rates are supported by a mix of global and regional tightening forces. On the global side, stricter sanctions enforcement is pushing more barrels back onto the compliant international fleet versus the shadow fleet, which tightens the effective VLCC tonnage supply and keeps rates elevated. In the Middle East specifically (TD3c), the embedded risk premium for Arabian Gulf port calls has moved higher, so owners need more compensation to take the voyage risk in the current geopolitical backdrop. On top of that, Sinokor’s rapid consolidation of 40+ VLCCs has concentrated ownership and reduced the odds of price capitulation. Net-net, this argues for higher lows and a higher trading range in global VLCC rates.

Regionally, the freight move is hurting USGC and ECSAM competitiveness the most. WTI TD22 RBI has swung to about $1.10/bbl overvalued from roughly $1/bbl undervalued a week ago, and a VLCC lifting Tupi off ECSAM into the Far East has moved from ~-$2/bbl undervalued to roughly neutral. Both regions have above-average tonnage counts (USGC +1 and ECSAM +4 versus their 14-day averages), while AG Arab Light TD3c RBI has held impressively near neutral through the spike in freight rates.

Michael Ryan, our Freight Commodity Owner at Sparta, brings over a decade of experience with Trafigura in the energy sector managing risk across products and regions before becoming Head of Risk for subsidiary Puma Energy. Michael then joined the Trafigura commercial team trading freight while successfully growing the physical fleet through strategic dealmaking.

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To find out how Sparta can allow you to make smarter trading decisions, faster, contact us for a demonstration at sales@spartacommodites.com