The Asian Aframax market has been strengthening steadily and the rates are expected to continue firming on the back of increased cargoes, weather delays and a tighter tonnage list, John Hahn, CEO at Ocean Freight Exchange, said in a LinkedIn post.
Namely, the rates for the Indonesia-Japan route were up by w30 points week-over-week at w130, while The Baltic Exchange’s benchmark TD14 route reached w127.50 on Tuesday, jumping by w29 points w-o-w.
Hahn said that this was partly due to underlying seasonality as refiners in the region typically raise utilization rates during the fourth quarter of the year in order to meet winter demand.
Japanese refiners increased their average utilization rate from 90% to 92.3% for the week ending December 3. This has led to growing demand for crude imports and subsequently cargoes, providing a seasonal boost to Aframax rates.
“Another bullish factor has been surging Russian production and exports,” Hahn said, adding that the Russian crude output hit 11.21 mmb/d in November, setting a new post-Soviet record for the third month in a row.
“The middle distillate-rich grade has seen robust demand from North Asian refiners during colder-than-usual weather conditions, pushing up Aframax rates,” according to Ocean Freight Exchange’s CEO.
Furthermore, Chinese buyers have turned to sweeter Russian crude grades such as ESPO Blend and Sokol to meet tightened product specifications for motor fuels. ESPO Blend has the geographical advantage of a 2-3 day short-haul voyage compared to Middle East crude, which can take up to a month to arrive in Asia.