According to Poten, “the countries around (or connected to) the Med include large oil consumers, such as France, Spain, Italy and Turkey as well as major oil producers, including OPEC members Algeria and Libya. Turkey is also a major transport hub for crude oil from Azerbaijan and Iraq via its Mediterranean terminal at Ceyhan. At the same time, it facilitates exports from Russia and Kazakhstan as oil is transported from the Black Sea through Turkish Straits into the Mediterranean.
Data from Vortexa shows that on an average day over the last 4 years, some 3.0 Mb/d of crude oil is loaded within the Med that is destined for other ports within the region. On top of that there are also barrels moving into the area from other sources (mostly from the United States) and movements of oil from the Med to other regions (primarily Northwest Europe as well as the United States).
About two thirds of the crude oil that is transported within the Med is carried on Aframaxes and a quarter on Suezmaxes. There is always a lot going on in the Med and this is reflected in the tanker market”. Poten added that “freight rates are extremely volatile, with the Aframax TCE’s on the Sidi Kerir to Lavera route, being used as benchmark.
We use this as the representative route for intra-Med voyages on Aframaxes. Over the period 2018 – 2024 YTD we have seen numerous peaks and troughs caused by a variety of events, most of them highly unpredictable. In the early part of this period, Libyan oil production was the wild card.
As a result of a civil war in the country, production fluctuated between 250,000 b/d and 1.1 Mb/d. Before a ceasefire agreement in October 2020, production, and exports virtually halted.
The global tanker market collapsed during the pandemic in 2020 and 2021”. “The Aframax market in the Med was no exception. The recovery from the pandemic started the recovery in freight rates.
The Russian invasion of Ukraine turbocharged rates because the Western sanctions against Russia boosted ton-mile demand for Aframaxes more than any other segment. After the price cap regime went into effect in October 2022, rates spiked to well over $100,000/day in November and December 2022. Aframax employment and rates were supported by the Russian trade while Urals traded below the $60/barrel price cap.
However, in the summer of 2023, Ural prices increased above the price cap and many Western owners exited the Russian oil trade, leading to a sudden increase in Aframax availability and a collapse in rates. By Mid-September 2023, Aframax rates in the Med were down to $10,000/day. Then Hamas attacked Israel, triggering a war in the Middle East.
Rates spiked again and have remained high, but volatile, ever since. What can we expect in this market going forward? It is impossible to predict. How will the conflict between Israel and Hamas evolve? Can the Houthi rockets reach the Eastern Med, as they claim? Will Northern Iraqi exports through Ceyhan resume? What about Russia? Too many variables to make a prediction, other than that the market will likely remain volatile.
Expect the unexpected”, Poten concluded. Nikos Roussanoglou, Hellenic Shipping News Worldwide.
