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Oil prices are trading near a two-month high

Oil prices are trading near a two-month high, at levels not seen since April 2024, as refineries ramp up for the summer driving season and traders worry about renewed tensions in the Middle East. Brent crude reached up to USD 87.4, gaining almost USD 10 per barrel since early June. The US counterpart, WTI (West Texas Intermediate), rose above USD 84 following the same trend as Brent. Analysts at the Energy Information Administration expect refineries to draw over 2 million barrels a day from inventories in the third quarter to boost production, reversing the stock build-up from the first half of the year. US gasoline demand is anticipated to surge this summer, with the American Automobile Association predicting holiday travel to increase by 5.2 percent compared to last year, and car travel to rise by 4.8 percent. In the meantime, oil supplies have also tightened with OPEC+ countries, particularly those in the Persian Gulf, having decreased significantly the exports during the past month due to increased crude burn for power, amid the ongoing heatwave in the Middle East. Oil prices fell sharply at the start of June after OPEC+ members announced plans to gradually re-introduce 2.2 million barrels of cut production back into the market, starting in September. Russia's seaborne crude oil exports increased in June despite pledges to cut production and challenges at key export terminals. The rise comes as refiners repaired damage from Ukrainian drone strikes and Europe ramped up sanctions. Total crude shipments averaged 3.71 million barrels per day, up from 3.52 million in May. India was the biggest recipient of the additional crude, while exports to China dipped. The EU's sanctions on Russia's largest shipping company and tankers had minimal impact, with the discount for Urals crude narrowing. Meanwhile, Russian oil product exports fell in June despite recovering refinery capacity. This was driven by a drop in naphtha and VGO exports, while gasoline shipments rose after a temporary export ban was lifted. OPEC+'s decision to extend production cuts into 2025, aiming for oil price stability above USD 75-80 per barrel, has created an unexpected consequence. Despite the usual volatility in crude oil and product demand, freight rates have been under pressure, experiencing a downward trend since early June. This is likely due to a combination of factors. OPEC+'s cuts may be leading to a temporary supply glut, reducing demand for tankers to transport oil while stockpiles in many countries are higher than usual as global economic growth is slower than forecasted, thus reducing the overall demand for oil products and further reducing tanker utilization.

The impact is evident across various tanker sizes. VLCC rates, the largest crude oil carriers, have taken a significant hit, dropping since early June 2024 by roughly 25% to around $29,888 per day. Similarly, Suezmax and Aframax rates, used for transporting medium-sized crude cargoes, have also fallen by 14% and 26% respectively. The product tanker market reflects a similar trend. Both the MR Atlantic and Pacific Baskets, used for transporting refined products, have witnessed similar in trend declines of nearly 30% and 23% compared to early June.

Despite both the current market situation and high secondhand tanker prices, there's ongoing sale and purchase activity. The first quarter saw an active market with 128 deals for tankers exceeding 10,000 dwt. The second quarter maintained this momentum with just a 6% dip, recording 120 transactions. While January and April saw higher activity with 56 sales each, June kept pace with February, March, and May, averaging around 32 tankers changing hands per month.

S&P Activity:

Dry:

On the Newcastlemax sector, the Scrubber fitted "Berge Bobotov" - 208K/2021 Bohai was sold for USD 75 mills to Greek buyers. The Capesize "Ocean Courtesy" - 178K/2008 SWS was sold for USD 24 mills to clients of Jinhui. On the Supramax sector, the "Nordic Stavanger" - 56K/2011 Mitsui found new owners for excess USD 18 mills, while the 2-year older "Rego"- 59K/2009 Tsuneishi Zhoushan changed hands for USD 16.4 mills. S&P activity was very strong on the Handysize sector, with 8 vessels founding new owners this week. Turkish buyers acquired the "Maestro Emerald" - 40K/2020 Saiki for USD 30 mills. The one-year older "Bamboo Star" - 38K/2019 Minaminippon was sold for excess USD 28 mills to S. Korean buyers, while the "Spica Harmony"- 37K/2019 Oshima found new owners for USD 28.5 mills. Furthermore, on the same sector, Greek buyers acquired the "Kouros Pride"- 34K/2011 Dae Sun for USD 13.8 mills, while the "Charline" - 30K/2010 Tsuji Heavy changed hands for USD 11mills.

Tanker:

In the tanker S&P market, the MR1 and MR2 sectors dominated activity this week. The MR2 "Endless Summer" - 50K/2010 Onomichi found new owners for USD 30 mills. Finally, 2x Scrubber fitted Interline coating MR1, the "TRF Memphis" - 38K/2016 HMD and the "TRF Mobile" - 38K/2016 HMD were sold enbloc for USD 69 mills to Norwgian buyers.

Xclusiv Shipbrokers Inc.