Crude flat prices saw some downward correction from the two-year highs last week, weighed down by growing US inventories as well as production. EIA weekly data indicated that US crude stockpiles jumped by 1.9 mmb for the second consecutive week, while US crude output touched a record high of 9.65 mmb/d. ICE Brent front-month futures fell by $2.57/bbl w-o-w while Dubai swaps were down by $1.32/bbl from the week before.
Naphtha cracks in Asia eased from last week on expectations of higher incoming supplies from the US as the arb window opened. At least 2 LR and 1 MR tankers were fixed this week to move naphtha from the USGC to the Far East. Market undertones remain bullish on the back of firm spot demand from regional crackers, with LPG prices still too high to be a viable option.
Asian gasoline cracks slipped on the week as stockbuilds in the US and Singapore outweighed spot demand from Indonesia and the Middle East. According to IE Singapore data, onshore Singapore light distillate stockpiles expanded by around 8.6% w-o-w while EIA data indicated that US gasoline inventories grew by 894 kb from last week.
While diesel cracks in Asia edged up w-o-w on the back of lower crude prices, market fundamentals remain weak. Rising regional spot supplies coupled with a closed arb to the West have diverted excess cargoes to Singapore, leading to a build-up in inventories. IE Singapore data indicated that onshore Singapore middle distillate stocks grew by around 4% on the week.
Fuel oil cracks in Asia grew on the week, in line with the drop in crude prices as well as lower supplies from the West. IE Singapore data indicated that onshore Singapore inventories dipped by 0.3% w-o-w to 3.52 mmt, the lowest in 1.5 months.
The Asian VLCC market saw a fairly uneventful week, with December stems only released at the end of the week. Stiff resistance from owners of modern tonnage, winter sentiment as well as growing bunker prices lent support to rates. As such, rates for the key AG/Japan route held steady at w70 points from the week before. Activity is expected to pick up next week as chartering for first decade December begins. In line with the subdued AG market, VLCC rates for the key WAF/East route edged down by w1.5 points w-o-w.
Suezmax rates for the key AG/East route inched up by w1 points from last week, buoyed by a jump in fixing activity as charterers worked third decade Basrah and Kharg cargoes. In contrast, WAF Suezmax rates continued their downwards spiral as TD20 fell by another w7.5 points w-o-w. Rates continue to face pressure from surplus prompt tonnage, a smaller third decade November program as well as a lack of Turkish Straits delays.
Aframax rates in the East of Suez saw further decline, with rates down by w2.5 and w5 points for an Indo/Japan and AG/East trip respectively. Ample availability of handicapped vessels in the Indo/Singapore region have weighed on rates, with charterers obtaining significant discounts of up to w12.5 points. More vessels were seen ballasting over to the AG, lengthening the position list.
The Asian LR market moved sideways over the week, with TC1 and TC5 rates flat at w122.5 and w125 points. Cargo enquiries for the LR2s are starting to pick up amidst tight tonnage, which may help to move LR2 rates upwards in coming weeks. With many LR1s taken on short-haul voyages in North Asia, the position list has shortened significantly and may give owners ammunition to obtain higher rates.
As for the MR segment, rates for the key AG/Japan route rose by w5 points w-o-w on the back of firm demand for cross-AG as well as AG-East Africa trips. Despite seeing less activity compared to the week before, market sentiment in North Asia remains bullish due to restricted vessel supply. A handful of longhaul cargoes to the US were covered over the week.