TThe resumption of crude oil and ship flows from the Strait of Hormuz is a catalyst for any future move in the tanker market, where oil supplies are currently constrained. Meanwhile, just as things were starting to look rosier by Friday afternoon, the situation proved different on Saturday, as Iran’s Revolutionary Guard closed the strait again, as long as the US naval blockade continued. As a result, dozens of ships were forced to turn back, while at least two ships were reported to have been fired upon.
In its latest weekly report, Gibson Shipbroker said: “Given the importance of trade flows in the Middle East and Gulf, everything else pales in comparison. In perhaps the most significant development since the start of hostilities, Iran’s Foreign Minister has just announced that the Strait of Hormuz is open to all commercial vessels transiting via a coordinated route for the remainder of the ceasefire. It remains to be seen whether this will translate into a meaningful resumption of traffic, as the US blockade will remain in place for the time being, while some reports suggest that coordination will remain.” “With the Iranian Revolutionary Guard, he is wanted.”
According to Gibson, “Shipping crude and clean oil from the Middle East still commands very high premiums; but these rates are theoretical given the current absence of physical trade. In the Atlantic Basin, shipping levels have also seen impressive rises, though nowhere near the levels in the Middle East. For crude oil, the peak seen in March was supported by US Strategic Petroleum Stockpile releases, rising Asian demand for Atlantic Basin shipments to replace lost Middle East barrels, and favorable arbitrage economics.” Crude Oil to Asia Outside the US Gulf region jumped more than 30% in March on a monthly basis, and we are seeing more strong gains so far in April in Latin America and West Africa, with both regions recording strong monthly gains in exports to Asia.
“However, what goes up must come down. A growing wave of eastbound VLCCs are beginning to make their presence felt, with cargo levels correcting sharply over the past two weeks, although for the moment earnings remain at very respectable levels. However, there is a more significant downside. VLCCs are in the most vulnerable position, with more than 60% of their trade coming from the Middle East. The increase in VLCC brakes from the east into the Atlantic Basin is unprecedented: in early April, this said Gibson: “It has reached the highest level since our records began, and as a result, we are now seeing the number of VLCCs in the West rise to its highest level in more than a year.”
“The downward correction in crude oil markets has not been reflected in the clean sector,” the shipbroker added. MR rates in the Atlantic Basin have gone from strength to strength over the past six weeks, also driven by rising long-haul demand. Long-haul trade from the US and Europe to Asia-Pacific more than doubled in March, while shipments to East and Southern Africa more than quadrupled, albeit from fairly limited levels. The bulk of this volume was moved on MRs, although cargoes LR also rose significantly as a result, although ship supplies to the west also increased due to the brakes, this was offset for MR by the number of long-distance ships fixed outside the area.
Source: Gibson Shipbrokers Limited
“MRs, however, are relatively insulated from turmoil in the Middle East – only 9% of all clean LR trade originated from the Gulf last year. LR2s and LR1s are a different story, with 44% and 33% of their volumes tied to Gulf flows. As more LRs weigh west and compete for MR cargoes, downward pressure will increase. The other question is how much Europe can maintain current export levels. In the US, Refinery run rates are low and Gibson noted that oil is already approaching its seasonal peak, and higher domestic demand over the summer will also divert some barrels away from exports.
“The long-term outlook for the tanker market depends largely on how long the conflict lasts. There have been some encouraging signs in recent days, but the twists and turns since the start of the war make it clear that the situation in the Middle East could change at any moment. There are hopes that there will be a quick resolution to the conflict, but if Hormuz remains closed, the tanker market in three to four months will look very different from what we see today,” the shipbroker concluded.
Nikos Rousanoglou, Global Hellenic Shipping News
