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Added Jun 2, 2021

Suezmax tankers infiltrate Europe-bound transatlantic crude flows

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Cheaper Suezmax freight rates led to increased employment for US - Europe flows. Will this trend continue amidst a positive environment for European crude imports?

Crude flows from US to Europe edged slightly upwards in May, recording an annual high of 1.17 mn b/d.
In a similar fashion the combined Aframax and Suezmax tanker utilisation - which traditionally dominates this crude trade lane - rose by 17% m-o-m, with 34 tankers employed in May.

Vortexa Freight Analytics shows a surge of cargoes loaded on Suezmax tankers at the expense of Aframax tankers. Evidently, charterers deemed it a more economically sensible solution to carry cargoes on this tanker class.

Aframax & Suezmax Tonne-mile share (%, LS) vs. Utilisation (no. of vessels, RS)

Interested in how these series are derived?

The spread between Aframax and Suezmax transatlantic freight rates was assessed at $6/t throughout May, according to Argus Media. At the start of April, Aframax tankers were only around $4/t more expensive than Suezmaxes.

Looking ahead, Suezmax utilisation ex-US Gulf could be limited in the short-run. According to Vortexa, Suezmax tankers ballasting towards the region from nearby locations are gradually thinning, as displayed in the graph below. This is set to translate into a lower number of cargo loadings and thus, a lower Suezmax utilisation rate going into June.

Suezmax tankers ballasting towards USG from neighbouring regions

Interested in how this series is derived?

Crude imports into Europe, however, have some room to improve. May arrivals from all sources stood at 11.4 mn b/d, up 550,000 b/d from the average of the previous 12 months, but still 1.5 mn b/d down from the 2019 average. As refining margins in the region are showing signs of improvement and opening steps after a slowdown of Covid-19 infections are speeding up, there should be ample room for more than just a 25% recovery. 

 

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