Crude flat prices crossed the $65/bbl mark at the start of the week, surging to their highest in more than 2 years on the back of the unplanned shutdown of the Forties crude oil pipeline for several weeks. News of a large stockdraw in US crude inventories lent support to oil prices as well, with EIA data indicating that US crude stocks dropped by 5.1 mmb for the week ending Dec 8. ICE Brent front-month futures jumped by $1.11/bbl from last week while Dubai swaps grew by $0.60/bbl w-o-w.
Asian naphtha cracks eased over the week as a flood of arb cargoes head over from Europe as well as the USGC, outweighing spot demand for 2H January delivery. Gasoline cracks in Asia edged up from last week on the back of spot demand from Indonesia and Vietnam. The unplanned shutdown of an FCC unit at IOC’s 300 kb/d Paradip refinery after a fire contributed to the increase into gasoline cracks.
Asian diesel cracks grew on the week, supported by firm demand from Vietnam, Indonesia and Sri Lanka. The East-West gasoil arb remains closed. Fuel oil cracks in Asia inched up w-o-w, buoyed by healthy bunker and utility demand from South Korea and Japan. Bunker sales in Singapore jumped by 4.2% y-o-y to 4.32 mmt in November.
The Asian VLCC market saw further downwards pressure as charterers covered the remaining stems for third decade December. A low fixture count for December (down by 10% m-o-m) and ample vessel supply continued to weigh on VLCC rates, with rates for the key AG/Japan route down by w6 points on the week.
In contrast, rates for the key WAF/Far East route edged up by w4 points w-o-w as the fixing window rolled over to second decade January. Any further upside seems limited for now as the declaration of force majeure on Forties crude is likely to lower VLCC demand in the Atlantic Basin. The corresponding wide Brent-Dubai EFS spread as well as heavily backwardated market structure have rendered WAF crude increasingly unattractive to Asian buyers, affecting the longhaul trade East.
It was a fairly dull affair for Suezmaxes trading in Asia as the market awaited the confirmation of January stem dates. Suezmax rates for the key AG/East route eased by w2.5 points from last week. The WAF Suezmax market faced a lack of fresh cargo enquiry with the December program fully covered as well as an ease in Turkish Straits delays, leading to the slip in rates. As such, TD20 fell by w2.5 points from the week before to w87.5.
Some Christmas cheer was seen in the Asian Aframax market as rates for an Indo/Japan trip and AG/East voyage grew by w9 points and w12 points w-o-w respectively. A flurry of activity in the Indo/Singapore region helped to clear out some tonnage while charterers gave in to owners’ demands for higher rates for long-haul voyages to Oz. A lack of ballasters to the AG has tightened vessel supply in the region.
The Asian LR market held steady over the week, with TC1 flat at w100 and TC5 up by w2 points. A tight position list and lack of fresh cargo demand kept the LR2 market balanced, while the LR1s remained busy with short-haul trips in North Asia as well as cross-AG.
Sentiment in the Asian MR market continued softening on the back of unusually subdued activity in all key regions. Rates for the key AG/Japan route dipped by w1 point from the week before while rates for a South Korea/Singapore run basis 40 kt fell by $40,000 on the week as position lists start to lengthen.