Crude flat prices grew on the week, buoyed by news of a larger-than-expected drawdown in US crude and gasoline stockpiles. EIA data indicated that US crude inventories plunged by 6.3 mmb w-o-w to 503 mmb, a 7-month low while gasoline stocks fell by 3.7 mmb to 238 mmb. ICE Brent front-month futures expanded by $0.69/bbl on the week while Dubai swaps were up by $0.57/bbl.
Asia naphtha cracks continued falling w-o-w on the back of persistent oversupply, as seen from spot cargoes being concluded at discounts. Ample inflows from the West and India have led to a build-up in buyers’ inventories. Asian gasoline cracks gained on the week, supported by demand from India and Pakistan as well as stockdraws in the US and Singapore. According to EIA data, US gasoline stocks dipped by 1.5% over the week while IE Singapore data indicated that onshore Singapore light distillate stockpiles declined by 3.5% w-o-w to 10.8 mmb.
Gasoil cracks in Asia jumped from the last week as buying interest from Indian state-owned refiners held firm amidst refinery turnarounds. HPCL tendered for another 60 kt of 40ppm sulfur gasoil for July delivery into Vizag.
Asian fuel oil cracks dipped w-o-w, in line with the growth in crude prices. A narrow E/W spread is likely to limit Western arb flows into Asia over the coming months, tightening supplies. According to Reuters, around 3-4 mmt of fuel oil is expected to arrive in Singapore for July and August respectively. Ex-wharf premiums in Singapore continued falling by $1.08/T w-o-w as bunker demand was subdued.
Rates in the Asian VLCC market moved sideways as a burst in chartering activity helped to prevent further decline. Rates for the key AG/Japan route were stable w-o-w at w51.5. The spread between modern and older units remained wide, with older vessels offering discounts as wide as w7.5 points for an AG/Onsan voyage.
Similarly, the WAF VLCC market saw a revival in activity after a quiet start to the week. Rates for the key WAF/East route held steady from last week at w55.The fixing window has rolled over into first decade August, with firm Chinese demand for Angolan crude expected to underpin cargo volumes.
Suezmax rates for the key AG/East route inched down by w1 point on the week as the lengthy tonnage list outweighed fresh cargo volumes from Kharg. Firmer sentiment in WAF may help to keep rates steady for now. The WAF Suezmax market continued its upward trajectory, with rates for TD20 up by another w5 points w-o-w to w65 on higher exports from Nigeria. Owner sentiment was firm as there were still outstanding cargoes for second decade July onwards.
The Aframax market in the East of Suez continued to be weighed down by a build-up of prompt tonnage (especially in Singapore) and a dearth of fresh cargoes. Rates for the AG/East route fell by w3 points from last week while rates for the Indo/Japan route dropped by w2.5 points on the week. A Kimanis/Geelong run was concluded at w90, eroding the previously considerable premium that Indo/Aus voyages held over Indo/Japan.
The Asian LR market firmed from last week, with TC1 and TC5 rates up by $0.37/T and $0.74/T respectively. A flurry of cargo enquiries as well as a tighter position list for the current fixing window lent support to both LR2 and LR1 markets, boosting owner sentiment. With the bulk of LR1 activity being short-haul voyages, one can’t help but question whether the rally in rates can be sustained.
MR rates for the key AG/Japan route eased by $0.36/T w-o-w as the market started to show signs of slowing down. Activity ex-AG and WCI regions showed a slight decline while prompt tonnage in North Asia began to build up once again.