DPP Export Dynamics in the AG
March 15, 2024
Following on last week’s note highlighting export dynamics in the AG, we discuss the impact for AG voyages for both VLCCs and Suezmaxes. Regarding the monthly change in VLCC movements ex AG (including KSA, but also Iraq, etc.), we note an uptick in AG VLCC flows in 2024 to both Ain Sukhna (for full discharge) and for partial discharge with continued transit directly to European refineries. This marks a notable change from the previous 3 months, particularly December 2023, when all VLCCs sailed around the Cape of Good Hope.
However, we anticipate the VLCC AG>West flow to slow down mainly due to 1) tightening crude balances in the Middle East; 2) refinery maintenance in Europe. From the supply side, the incremental VLCCs fixed to Europe, versus going to the Asian market, would theoretically tighten the available VLCC tonnages in the AG, since it takes 90 more days to complete one AG>Europe>USG>Asia>AG triangulation (133 days; Cape/Cape) and reposition the tonnage back in the AG compared to the round-trip AG>Far East voyage (43 days).
Figure 1 – VLCC: Mid East > Europe Voyage Count Figure 2 – Suezmax: Mid East > Europe Voyage Count
Source: McQuilling Services
For Suezmaxes, activity for AG>West remained slow and has been lower compared to the same period last year – with 90% of these 2024 voyages sailing around the Cape of Good Hope (measured through the end of February). The lengthened sailing distances and higher freight structure for Suezmaxes could see charterers combining cargo stems and take advantage of the cheaper VLCCs for AG>West movements, slightly supporting VLCC demand.
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