Tanker - Weekly Market Monitor Week 43 - 2024

Chart of the Week: VLCC Ras Tanura - Port Congestion Metrics

This week’s focus highlights a decrease in vessel congestion at the port of Ras Tanura for dirty tankers, including VLCCs and Suezmax vessels. Port congestion metrics show a 25% decline on both a weekly and monthly basis. However, in contrast, port days metrics have recently risen by 25% on a weekly basis and by a significant 177% over the past month. The key question remains whether this increase in port days will lead to a subsequent rise in vessel congestion, potentially putting upward pressure on freight market momentum.

This week’s focus highlights a notable decrease in vessel congestion at the port of Ras Tanura, specifically for dirty tankers, including VLCCs and Suezmax vessels. Port congestion metrics show a 25% decline both on a weekly and monthly basis, signalling improved traffic flow. However, a contrasting trend emerges when examining port days metrics, which have surged by 25% on a weekly basis and a dramatic 177% on a monthly basis. This sharp rise in port days suggests vessels are spending significantly more time in port, likely due to operational delays or extended loading periods.

The relationship between these metrics is crucial. While congestion has eased in terms of vessel count, the rise in port days could indicate inefficiencies or bottlenecks at the port that could eventually result in a build-up of vessels. Should this trend persist, it may lead to an increase in vessel congestion for dirty tankers, exerting upward pressure on freight rates due to tighter vessel availability. This dynamic could shift the freight market momentum, particularly if demand for cargoes out of Ras Tanura remains robust and vessel supply remains constrained. The market will closely watch whether the extended port stays translate into longer-term congestion and higher freight rates for dirty cargoes in the coming weeks.
Meanwhile, the final week of October is closing with firmer momentum in VLCC freight rates on the AG-China route, despite underlying concerns about future demand, as projections for Chinese oil demand remain sluggish.
The International Energy Agency’s (IEA) latest Oil Market Report for October has tempered expectations, forecasting a global oil demand increase of just 862,000 barrels per day (bpd) this year. This represents a downgrade from the 903,000 bpd increase projected in the previous month's report. The deceleration is largely driven by weaker consumption growth in China, which has been a key driver of the global oil market in recent years. Concerns about China’s economic recovery, ongoing restrictions in key industrial sectors, and a pivot toward renewable energy may be contributing to the softer outlook.
Given China’s significant role in shaping VLCC demand on key crude oil trade routes, the IEA’s downgrade raises questions about the longer-term outlook for VLCC freight rates. While the short-term momentum appears strong, any sustained weakness in Chinese demand could weigh on future rate increases, particularly if vessel availability remains robust or newbuild deliveries increase supply.