Belying its usual trend of aligning with the AG market, VLCC rates on the WAF/East route grew by w1.5 points on the week to w55 last Thursday due to increased activity in WAF as well as owners’ increasing refusal to lock in long-haul voyages at low returns. The lack of disadvantaged units in WAF also allowed owners to grab a premium for modern tonnage.

The total number of ex-WAF VLCC fixtures last week grew by 62.5\% w-o-w to 13, marking a four-week high. This reflected a surge in third-decade April loading cargoes which helped to tighten tonnage in the region. However, overall WAF April loading crude exports to Asia fell by 2.1\% m-o-m to 2.07 mmb/d according to Reuters data. Our data indicates that around 35 ex-WAF VLCC stems have been fixed for April loading, down by 12.5\% m-o-m. Demand from Asian buyers (notably China) was muted compared to the last two months due to heavy refinery maintenance in Asia which peaks in April. At least 2.5 mmb/d of refining capacity is likely to be shut in April, up by 1.2 mmb/d y-o-y.

As we move into the fixing window for May loading cargoes, Asian demand for WAF crude may recover as refinery maintenance starts to ease in May. Rates for a WAF/East journey have since strengthened further to w61 on Wednesday, with at least 4 ships placed on subs at w60 and above for first decade May loading as owners try to sustain momentum. Unipec placed Olympic Leader on subs for a WAF/China run at w61.5, loading May 3-5 basis 270 kt. A narrow Brent-Dubai EFS will continue to incentivize the movement of barrels to the East.
Source: OFE Insights