Rates for VLCCs in West Africa have fallen because of weakness in the Persian Gulf market and despite strong demand for February loading dates amid a bust of buying of the region’s heavy crudes by Asian refiners, sources said.
Persian Gulf demand has been hit by OPEC’s agreed cut in crude output.
There have already been 33 VLCC stems fixed out of West Africa for February with more stems left to go, compared with 35 for all of January.
February 10-20 dates in particular have seen 19 cargoes fixed against 12 in the same period last month. March stems have not been seen being worked in the market but demand was expected to be high, sources said.
That has made little difference to VLCC freight rates though, with the West Africa to China route, basis 260,000 mt, falling to $16.10/mt Tuesday from a high of $21.92/mt on January 3, according to S&P Global Platts data.
There has been a knock-on effect on smaller Suezmax vessels. “A lot of the middle decade [of February] fixing window has gone east on VLCCs and there is very little cargo left to fix on Suezmaxes,” a shipbroker said.
The Suezmax route from West Africa to UK Continent, basis 130,000 mt, fell to a month low of $7.79/mt Tuesday from $13.71/mt.
High demand from Asian end-users — largely due to a tighter Brent/Dubai spread, a tighter supply of heavy barrels globally, and falling freight rates — has seen heavy crudes from West Africa clear at a rapid pace.
Other factors have also been helping West African crude clear at high levels, trading sources said, notably fuel oil cracks and buying ahead of the Lunar New Year.
That meant Angola’s March loading program was practically sold out within 10 days of its publication on January 16, sources said. Heavy grades from Chad, Republic of Congo, and Ghana have also cleared swiftly.
“The health situation for the other regional WAF grades has been good in March. Djeno, Doba, Ten, Jubilee, they are all [sold],” said one crude trader.
As a result, values for Angolan heavy grades have rocketed, with most seeing a 50 cents/b improvement on February levels.
“Angolan levels have been super strong in March,” a second West African crude trader said.