Tankers

Black days in the Black Sea

Tanker freight rates have followed variable paths since the start of the invasion of Ukraine

The tasteless cliché is that tanker markets enjoy a good war. But while oil prices have risen above $100 per barrel and stayed there, tanker freight rates have followed variable paths. The BCTI leaped 53% from 690 points on February 23, the day before the invasion, to 1,054 on March 11 but has subsequently slid back 28% to 961 points on March 24. The BDTI more than doubled from 725 points on February 23 to a peak of 1,517 points on March 7 but has also slid by 28% to 1,093 points on March 24.

Traders scrambled for Russian crude exports after the invasion, with the result that the aframax time charter equivalent (TCE) reported by the Baltic Exchange jumped from $-1,047 on 23 February to $90,265 on March 1; one of the fastest spikes in freight market history.

Baltic Exchange route TD17, the aframax voyage from Primorsk to Wilhelmshaven, was slumbering at $ 4,216 on February 15 before leaping over $100,000 a day to $121,741 on February 24, then on to over $200,000 just four days later. It stayed above $200,000 until March 18 having peaked at $266,650 on March 14. By March 24 it had retreated to $116,947. Cargoes are still moving, but fewer buyers are willing to identify themselves.

Similarly, TD18, the Baltic-UK Cont fuel oil run of 30,000 tonnes, stood at an anaemic $576 the day before the invasion then zoomed to a peak of $26,890 on March 2 before falling back to $8,444 on March 24.

TD5, the suezmax trip from Russia’s Black Sea port of Novorossiysk to Augusta in Italy, lay slumped at $-2,320 on February 23. It perked up to $107,382 just two days later, peaked at $ 157,771 three days after that, but has since deflated to $ 70,196 on March 24.

TD24, the aframax route from Kozmino in Russia’s Far East to Qingdao in northern China, spent most of February hovering around a freezing $250. It also climbed exponentially to hit $41,449 on March 16 and has since stabilised, levelling off at $41,526 on March 24.

Where the Russian export markets go from here is a political rather than an economic matter and thus beyond prediction. But outside of the Russian export markets, tanker freight rates have not budged very much. The Baltic’s V2TCE average was $-21,647 on February 23, it rose to $-2,301 on March 1 but has since sunk back to $-27,656 on March 24. Fears over lockdowns in China, which now cover 30% of Chinese GDP output, and what that does to China’s oil import requirements, are a reminder that we are still in the midst of a global pandemic and that the world’s largest oil importer is economically more fragile than it has been for many years.

In the clean tanker markets, the benchmark TC1 LR2 route from the Middle East to Far East has mounted a strong recovery after a negative first six weeks of 2022. From a low of $-945 in late February, earnings have averaged almost $21,100 in March, peaking at $27,196 on March 16 as traders stocked up, fearing further price rises if global fuel supplies remain tight.

The MR Atlantic basket average had already recovered from a low of $5,032 on January 25 to $16,162 by February 21. It spent most of March over $20,000 a day, slipping back a quarter to $15,503 on March 24. Road fuel prices may be rising in the US and Europe, but they aren’t yet denting demand, while jet fuel demand is rising again, not least due to all the military aircraft activity in Europe. The Pacific MR market followed suit, improving from $6,703 on February 7 to a peak of $23,986 on March 16. From there it has lost momentum, ending up at $17,921 on March 25. The other star performer was the Jamnagar-Chiba route for MR tankers, which leaped from a low of $737 on February 15 to a peak of $12,849 on March 16. This too has subsequently declined by around a third to $8,383 on March 24 as traders, having replenished inventory, now take stock of the situation and plan their next move. ●