West African Suezmax freight rates spike to 24-week high on low tonnage

The cost of sending crude oil cargoes from West Africa to Northwest Europe on Suezmaxes has risen sharply because there are few vessels available for the start of the first decade of June, shipping sources said.

The WAF-UK Continent route, basis 130,000 mt, was assessed Worldscale 35 higher at w120 Thursday, which equates to $23.35/mt and was the highest level since a November 26 assessment of $24.70/mt.

While the cargo flow in West Africa has not been unusually high in recent days, there was a significant gap in the position list until June 5, which has enabled shipowners to drive up rates for cargoes loading before then.

One victim of the tight tonnage list was Petrogal, heard to have put the SCF Sahan on subjects at w135 for a WAF-Portugal replacement fixture loading June 2. The original fixture was done at w82.5.

The size of the rise from previous WAF-UKCM fixtures concluded at w82.5-85 left many market participants unwilling to call the market at such a high level in the absence of further fixtures.

“It is a significant jump in rates in the space of one fixture. There are no real fundamentals to support such a huge jump [being sustainable],” a shipbroker said. “We have not had huge volumes or bad weather. But where does it leave charterers with cargoes to fix off similar dates?”

There were still around 3-4 cargoes in the market early Friday, with sources saying charterers were likely to work slowly to try to take some steam out of the market.

“It seems everyone is taking a step back and waiting now. Unless you have a trader on your back telling you you absolutely have to fix today, a charterer would be better off waiting until Monday to fix,” a broker said.

One possible consequence of the higher rates and low Suezmax availability is that charterers could explore co-loading Suezmax cargoes onto larger VLCCs, sources said, though tonnage was also tight in that sector.

“The Suezmax rates have gone through the roof, so some people could start to look to VLCCs soon. But there are not many of them around either. It is the perfect storm for the owners,” said a VLCC broker.

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