Argus Freight Daily International Freight Rates and Market Commentary

Argus Freight Daily international freight rates and market commentary

Issue 20-111 | Monday 8 June 2020

DIRTY TANKERS PRICES

Mideast Gulf VLCC rates edge lower Dirty freight rates Chartering demand VLCC's out of the Mideast Gulf remained Size Daily Route ± $/t muted during Monday’s session, with Opec members' an- ’000t Worldscale nouncement that they have agreed a one-month extension Middle East and Asia-Pacifi c of production cuts increasing uncertainty. Mideast Gulf-East (double hull) 270 57.5 -1.5 13.48 The Mideast Gulf to east Asia rate edged WS1.5 lower to Mideast Gulf-Singapore 270 60 -1.5 9.11 close at WS57.5. Early in the day Korean refi ner GS Caltex and trader Koch — which had outstanding cargoes from last Mideast Gulf-UKC/Med 280 32 -1 9.43 week — withdrew cargoes without fi xing. Demand for the Mideast Gulf-US Gulf 280 32 -1 12.25 class out of Mideast Gulf remained muted for the rest of the Mideast Gulf-East - fuel oil 80 85 -2.5 12.84 session. Opec members agreed on a proposal to extend with the SE Asia-EC Australia 80 82.5 -2.5 15.02 wider Opec+ group's 9.7mn b/d cuts for another month. The Red Sea-China 80 87.5 -2.5 22.80 proposal is subject to approval by the non-Opec members, Indonesia-Japan 80 82.5 -2.5 11.98 but has added to uncertainty among shipowners. In addition, Kozmino-Yosu* 100 425,000 -100,000 4.25 some vessels that were previously engaged in fl oating storage activities have been reportedly spotted seeking employ- Kozmino-north China* 100 525,000 -100,000 5.25 ment in the spot market, according to market participants. Kozmino-Chiba* 100 525,000 -100,000 5.25 Demand is typically lower during the summer period, causing Kozmino-Singapore* 100 575,000 -90,000 5.75 a seasonal lull in freight rates, and VLCCs could face a weaker than usual market this year due to prolonged production Northern Europe cuts, a market participant commented. North Sea-northeast Asia* 270 6,400,000 nc 23.70

The west Africa to China rate closed at WS57.5, down UKC-US Gulf 260 70 nc 14.19 by WS2.5. ExxonMobil made available the only cargo in the Cross UKC 135 80 nc 5.84 area for the class during the session. The charter sought a VLCC from west Africa to east Asia and loading from 25-27 UKC-US Gulf 135 50 nc 10.14 June, but negotiations did not materialise in a ﬁ xture before Cross UKC 80 75 nc 4.55 London closing time. UKC-US Atlantic coast 80 52.5 -2.5 8.01 European and African Suezmax rates hold Primorsk-UKC 100 52.5 -5 4.82 Elevated chartering demand for the Suezmax class on UKC-US Gulf fuel oil 55 80 nc 16.62

Monday did not lead to ﬁ xtures, and freight rates for vessels Baltic-UKC fuel oil 30 140 nc 12.89 loading out of Europe and west Africa remained unchanged. Baltic-Med fuel oil 30 135 nc 22.23 The west Africa to the UK continent/Mediterranean rate closed ﬂ at at WS52.5. Tonnage availability was enough to West Africa absorb any upward pressure on freight rates despite several West Africa-US Gulf 260 60 -2.5 13.39

West Africa-China 260 57.5 -2.5 21.17

CONTENTS West Africa-Singapore 260 60 -2.5 17.39 West Africa-W coast India* 260 4,250,000 nc 16.35

Tankers 1-8 West Africa-India* 130 2,250,000 nc 17.31 LPG 8 West Africa-US Gulf 130 47.5 nc 10.60 Dry Bulk 9 News 10-18 West Africa-UKC/Med 130 52.5 nc 9.10 *$ lumpsum

charterers splitting VLCC cargoes into Suezmax vessels last Dirty freight rates Size Daily week. But demand for the class remained elevated on Mon- Route ± $/t ’000t Worldscale day, with at least four cargoes available in the region, and shipowners are targeting higher rates. Charterers pushed Black Sea and Mediterranean for a variety of options as potential discharge destinations Novorossiysk-Med 140 57.5 nc 5.81 and shipowners were reluctant to agree at current levels, a Black Sea-Med 135 60 nc 5.98 market participant commented. None of the cargoes were Cross Med 135 55 nc 3.51 covered before London closing time. Med/Black Sea-US Gulf 135 45 nc 10.14 Charterers sought at least fi ve Suezmax vessels from the Med/Black Sea-East* 135 2,750,000 nc 20.37 Mediterranean and Black Sea, mostly for voyages to east Cross Med 80 62.5 -5 4.60 Asia. India's state-owned BPCL took the Marathi from Ceyhan Black Sea-Med 80 70 -2.5 6.98 to west coast India, loading from 23 June at $1.875mn. No Med/Black Sea-US Gulf 80 55 -2.5 12.72 regional voyages were booked during the session and the Med-US Gulf fuel oil 55 80 nc 18.94 cross-Mediterranean and the Black Sea to the Mediterranean Cross Med fuel oil 30 130 nc 8.71 rates closed fl at at WS55 and WS60 respectively. Tonnage Black Sea-Med fuel oil 30 140 nc 14.20 availability in the area remains elevated and has the potential to absorb increased demand in the short term before Americas fundamentals shift enough to aff ect freight rates, a market Caribbean-China* 270 7,750,000 nc 28.70 participant highlighted. Caribbean-Singapore* 270 6,750,000 nc 25.00 Caribbean-WC India* 270 6,250,000 nc 23.15 East of Suezmax Aframax rates decline USGC-China* 270 7,750,000 nc 28.70 Rates fell across all Aframax routes east of Suez at the start USGC-Rotterdam* 270 4,250,000 nc 15.74 of the trading week, amid limited fi xing activity and growing USGC-Singapore* 270 6,750,000 nc 25.00 tonnage availability in the region. USGC-South Korea/Japan* 270 7,750,000 nc 28.70 Aframax activity for the southeast Asia region was lim- USGC-WC India* 270 6,250,000 nc 23.15 ited to short voyages within southeast Asia. Amid muted fi x- Brazil-China 260 56.5 nc 23.59 ing activity for the longer southeast Asia-east coast Australia USGC/Caribs-Singapore* 130 3,000,000 -250,000 23.08 and Indonesia-Japan routes, market participants indicated USGC-China* 130 3,250,000 -250,000 25.00 that fair value rates fell by WS2.5 points to WS82.5. Aframax USGC-Europe 150 46.5 nc 9.83 cargoes from the Mideast Gulf to east remained absent on Monday. There were no reports that last week's competition Caribbean-USGC 130 75 nc 6.78 from Suezmax vessels for Aframax cargoes was continuing, Caribbean-UK continent 150 46.5 nc 8.43 but inactivity in the market continued to weigh on rates. Caribbean-Panama 130 85 nc 3.79 The Mideast Gulf-east Asia rate fell to WS85, from WS87.5 on Caribbean-US Gulf 70 65 +2.5 6.50 Friday, and the Red Sea-China rate fell by the same amount USGC-east coast Canada 70 55 +2.5 7.81 to close at WS87.5. USGC-Europe 70 50 +2 10.59 The lumpsum for Kozmino cargoes took a sharp drop, East coast Mexico-USGC 70 65 +2.5 3.45 taking direction from two Kozmino-north China runs booked Caribbean-UK continent 70 50 +2.5 9.08 late Friday and both brokered by Russian shipping company Caribbean-US Gulf 50 90 nc 9.00 Sovcomfl ot. Multinational trader Trafi gura booked a 100,000t Ecuador-USWC 50 235 -24 31.21 Kozmino-north China cargo on the 2010-built Aframax East coast Mexico-USGC 50 90 nc 4.19 Olympiysky Prospect at $525,000, loading from 20 June, USGC Aframax reverse lightering* - 200,000 - - and Russian oil company Lukoil booked a 100,000t cargo *$ lumpsum with the same route and rate, but with a vessel that is yet to be nominated. There are some confl icting reports about the loading dates for the second booking, which has been Turkish straits delays and demurrage reported as either from 19 June or from 23 June. Route Units ±

Delay at Turkish straits NB days 1 nc Delay at Turkish straits SB days 1 nc Black Sea-Med Suezmax demurrage $/day 27,50 0 nc Black Sea-Med Aframax demurrage $/day 20,000 nc

VLCC FREIGHT RATES

Mideast Gulf-East 270,000t West Africa-China 260,000t Daily -2.60% Daily -4.16% Week-on-week -7.57% Week-on-week -0.22% Year-on-year +69.56% Year-on-year +62.73% Caribbean-Singapore 270,000t

Daily nc Week-on-week +19.45% Year-on-year +45.02%

European Aframax rates edge lower restarted their operations during the weekend as the force European Aframax trade remained dormant on Monday, majeure was lifted. The restarts could add up to 400,000 and increased vessel availability weighed further on freight b/d and boost fundamentals for the class in the Mediterra- rates. nean when completed, although the portion of the crude oil The Baltic to the UK continent rate closed at WS52.5, that will be exported remains unclear. down by WS5, with the cross-UK continent rate also WS5 lower at WS70. Demand for Aframaxes from Northern Europe was limited during the session. Trading fi rm Petraco put an ST shipping unnamed vessel on subjects from Primorsk, loading from 14 June at WS37.5, but with a Mediterranean, rather than UK continent, destination. Tonnage availability weighed on freight rates in the area with over 20 promptly Dirty: Cross Med 80kt vs Black Sea-Med 135kt Worldscale available vessels looking for employment, according to market participants. The increased tonnage availability could 75 further weigh on freight rates this week if demand stays at 50 current levels, some said. The cross-Mediterranean rate slipped by WS5 to WS62.5 25 and the Black Sea to the Mediterranean rate fell by WS2.5 0 to WS70. Chartering activity in the Mediterranean and Black Sea areas was muted during the session. A few fi xtures that -25 hhhhhhh were agreed during the weekend were reported today, such -50 as Spanish fi rm Cepsa taking the NS Consul from Algeria to Spain, loading from 12-13 June at WS75. The fi xture was -75 negotiated on a premium due to the short duration of the voyage and the prompt loading dates, a market participant -100 5 Mar 20 3 Apr 20 6 May 20 8 Jun 20 commented. The El Sharara and El Feel oil fi elds in Libya

Dirty Americas tankers: Aframaxes rise Handysize fuel oil rates remain fl at Rates for Aframaxes in the dirty Americas tanker market Freight rates for Handysize tankers carrying fuel oil refi rmed slightly amid an uptick in demand for the vessel class. mained steady on Monday, in a market where the supply/de- Phillips 66 booked the Victory Venture Aframax for an mand balance remained fragile as there were suffi cient ships east coast Mexico-US Gulf coast voyage from 15 June at and only moderate demand. WS65, lifting the rate on the route by WS2.5 to the level of The Black Sea to Mediterranean rate closed fl at at the deal. Additionally, Marathon sought a Suezmax for a voy- WS140. One charterer reportedly put a ship on subjects at age on the route from 12-13 June. this level. But booking activity still remained relatively slow, BP and Valero each sought an Aframax for a US Gulf a market participant said. coast-Europe voyage from mid-June. The US Gulf coast- And in northwest Europe, the cross-UK continent rate Europe Aframax rate fi rmed by WS2.5 to WS50. also closed fl at at WS140. But charterers might only agree to Balanced fundamentals held VLCC rates steady in the US this level for newer or more fuel-effi cient ships, one shipbro- Gulf coast amid a day of muted chartering activity for the ker said. If the charterer was willing to take an older vessel, vessel class. then it might be able to secure it slightly below the current A charterer booked the Azure Nova VLCC for a US Gulf level. coast-Asia voyage from 8-10 July. In the Panamax market, the UK continent to US Gulf rate The US Gulf coast-China VLCC rate stayed at $7.75mn remained steady at WS80, in line with the last booking of lump sum, and the US Gulf coast-Singapore VLCC rate re- the Stena Paris at this level. mained at $6.75mn. The Brazil-China VLCC rate was unmoved at WS56.5, as no fresh activity was heard on the route. Glencore booked the Marvin Star Suezmax for a US Gulf Dirty: Black Sea-Med 80kt Worldscale coast-Singapore voyage from 4-5 July for $3mn, lowering the rate on the route by $250,000 to that level. The US 300 Gulf coast-China Suezmax rate fell by the same amount to $3.25mn. 250 The US Gulf coast-Europe Suezmax rate was fl at at WS46.5, and the Caribbean-US Gulf coast rate for 130,000t 200 cargoes held steady at WS75, as no fresh activity was heard on either route. hhhhhhh 150

100

50 5 Mar 20 3 Apr 20 6 May 20 8 Jun 20

Dirty: Cross UKC 80kt vs Cross Med 80kt Worldscale Dirty: Cross Med 80kt Worldscale

80 250 225 60 200

40 175

20 150 hhhhhhh hhhhhhh 125 0 100

-20 75

-40 50 5 Mar 20 3 Apr 20 6 May 20 8 Jun 20 5 Mar 20 3 Apr 20 6 May 20 8 Jun 20

CLEAN TANKERS Clean freight rates Size Daily Route ± $/t East of Suez tanker rates mixed ’000t Worldscale East of Suez LR1 and MR tanker rates, fell again on Monday, Black Sea and Mediterranean owing to limited demand, whereas LR2 tanker rates ticked Med-Japan* 80 2,100,000 nc 26.25 up as trading activity picked up compared with last week. The Mideast Gulf-Japan LR2 rates increased to WS80 Med-Japan* 60 1,650,000 -50000 27.50 from WS76. Over the weekend, more LR2 shipments heading Cross Med 30 125 -5 9.00 to the west of Suez were reported, depleting the current Black Sea-Med 30 147.5 +2.5 16.46 tonnage in the Mideast Gulf. Shipowners were not willing to Med-UKC 30 135 -5 17.73 lower the freight below WS80, with more cargoes released Med-US Atlantic coast 37 112.5 -7.5 19.87 to the market since last week, one shipbroker said. But Med naphtha premium 30 0 nc - some others argued that more cargoes would be required to Med gasoline premium 30 0 nc - boost the market further. Med jet premium 30 0 nc - While LR2 rates picked up slightly, the Mideast Gulf- Cross Med naphtha 30 125 -5 9.00 Japan LR1 market remained sluggish, and rates slid to WS80 Cross Med gasoline 30 125 -5 9.00 from WS82.5. Vessel availability, particularly considering Cross Med jet 30 125 -5 9.00 that some LR1 tankers are ballasting from Asia Pacifi c to the Mideast Gulf, outweighed the demand for cargoes, pressing Med-UKC naphtha 30 135 -5 18.05 down the market rates further. Med-UKC gasoline 30 135 -5 16.66 MR rates from the Mideast Gulf decreased by WS2.5 Med-UKC jet 30 135 -5 16.66 points across the board, based on the bid and off er levels Middle East and Asia-Pacifi c from the market. Focus was on short-haul bookings within Mideast Gulf-UKC* 90 2,100,000 -100000 23.33 the Mideast Gulf, rather than trips to the Asia-Pacifi c, owing Mideast Gulf-Japan 75 80 +4 20.04 to lower time charter equivalent (TCE) rates for the Asia- Mideast Gulf-Japan 55 80 -2.5 20.04 Pacifi c market. The focus on shorter voyages means fewer Mideast Gulf-UKC* 65 1,300,000 -50000 20.00 tonne miles and a quicker turnaround of vessels. Trader Vitol Mideast Gulf-Singapore 55 92.5 -2.5 13.39 booked the Torm Astrid at $215,000 for a 35,000t gasoil ship- Mideast Gulf-Singapore 35 147.5 -2.5 22.29 ment from Jubail to Pakistan, loading from 9 June. Mideast Gulf-Japan 35 105 -5 25.98 In the Asia Pacifi c, the cost to ship a 30,000t cargo from southeast Asia to east coast Australia stabilized. Australian Mideast Gulf-East Africa 35 140 -2.5 16.77 refi ner Ampol placed the STI Dama on subject at WS130 for Singapore-Japan 30 130 -2.5 16.20 a 35,000t shipment from Singapore to Australia, loading South Korea-Singapore* 35 323,000 -3000 9.23 from 23 June, and BP followed the same rate when booking South Korea-USWC* 35 880,000 nc 25.14 the Kourous for a 35,000t shipment from Malacca to Aus- SE Asia-EC Australia 30 152.5 nc 26.21 tralia, loading from 19 June. In north Asia, the lump sum to Northern Europe UKC-US Atlantic coast 37 112.5 -7.5 17.21 Clean: Cross Med 30kt UKC-east coast Mexico 37 102.5 -7.5 20.86 UKC-South America 37 132.5 -7.5 25.68 700 UKC-West Africa 60 100 -7.5 18.05 600 UKC-West Africa 37 127.5 -7.5 23.01 Cross UKC 22 130 nc 7.23 500 Cross UKC 30 100 -5 5.56 400 Baltic-UKC 30 110 -5 9.96 Others 300 hhhhhhh ARA-Walvis Bay - - -1.7 28.22 200 ARA-Durban - - -2 33.94

100 Mideast Gulf-Walvis Bay - - -0.6 30.46 Mideast Gulf-Durban - - -0.4 21.98 0 *$ lumpsum 10 Mar 20 7 Apr 20 7 May 20 8 Jun 20

transport a 35,000t shipment from South Korea to Singapore Clean freight rates - Americas Size declined to $323,000 from $326,000. Rate ± $/t ’000t Clean Americas tankers: Rates rise Worldscale Caribbean-USAC 38 130 nc 13.57 Rates in the clean Americas tanker market increased on the USAC-UKC 38 80 +5 12.60 back of tight tonnage supply amid a day of muted chartering USGC/Caribbean-UKCM 38 90 +5 16.34 activity. USGC-east coast South America 38 135 +5 BP booked the Silver Hessa for a US Gulf coast-Chile voy- USGC-north Brazil 38 22.75 age from 8-10 June for $1.375mn lump sum, lifting the rate USGC-south Brazil 38 30.16 on the route by $75,000 to the level of the deal. USGC-Argentina/Uruguay 38 35.24 A charterer fi xed the Maersk Torshavn for a US Gulf USGC-east coast Canada 38 130 nc 17.16 coast-Caribbean voyage with prompt loading. The US Gulf Lump sum coast-Pozos rate fi rmed by $20,000 to $485,000. EC Canada – USAC 38 400,000 nc 10.53 USGC-Chile (not south of Coronel) 38 1,375,000 +75,000 36.18 BP’s booking of the Aquila L for a US Atlantic coast- Quintero diff 38 -50,000 nc -1.32 Europe voyage with prompt loading at WS80 failed, and the Caldera diff 38 -100,000 nc -2.63 rate on the route fi rmed by WS5 to the level of the failed Mejillones/Antofagasta diff 38 -125,000 nc -3.29 deal. The US Gulf coast-Europe rate increased by the same USGC-Dominican Republic 38 435,000 +20,000 11.45 amount to WS90. USGC-east coast Mexico 38 265,000 nc 6.97 The US Gulf coast-east coast South America rate in- USGC-Ecuador 38 1,075,000 +75,000 28.29 creased by WS5 to WS135, although no fresh activity was USGC-Guaymas 12 - - 34.61 heard on the key route. USGC-Japan 38 1,550,000 nc 40.79 Chartering inactivity persisted on the Pacifi c coast of USGC-Las Minas 38 435,000 +20,000 11.45 the Americas, but rates were supported by tight tonnage USGC-Lazaro Cardenas 38 1,125,000 +75,000 29.61 USGC-Peru 38 1,175,000 +75,000 30.92 supply. The US west coast-Chile rate increased by $50,000 Callao/Conchan diff 38 -50,000 nc -1.32 at $950,000, and the US west coast-Rosarito rate was fl at at USGC-Pozos 38 485,000 +20,000 12.76 $350,000. USGC-Rosarito 38 1,275,000 +75,000 33.55 USWC-Chile (not south of Coronel) 38 900,000 nc 23.68 Quintero diff 38 -50,000 nc -1.32 Caldera diff 38 -100,000 nc -2.63 Mejillones/Antofagasta diff 38 -125,000 nc -3.29 USWC-Guaymas 12 - - 17.54 USWC-Lazaro Cardenas 38 500,000 nc 13.16 USWC-Rosarito 38 350,000 nc 9.21 USWC-Topolobampo 19 - - 12.37 Demurrage $/day Atlantic coast Americas MR 38 - - 20,500

Clean: MEG-Japan 75kt Worldscale Clean UKC-USAC 37kt vs Caribs-USAC 38kt Worldscale

600 200

500 150

100 400 50 300 hhhhhhh 0 hhhhhhh 200 -50

100 -100

0 -150 10 Mar 20 7 Apr 20 8 May 20 8 Jun 20 10 Mar 20 7 Apr 20 7 May 20 8 Jun 20

MR FREIGHT RATES

Europe-USAC 37,000t

Daily -6.26% Week-on-week +6.23% Year-on-year +37.91%

USGC-Colombia 38,000t

Daily +4.25% South Korea-Singapore l

Week-on-week +4.28% Daily -0.92% Year-on-year +44.65% Week-on-week -3.08% Year-on-year +17.98%

MR demand continues to slow down other destination options. There was just one cargo for a Demand for MR tankers slowed down further on Monday with voyage left in the market at the end of the day and one around two cargoes seen left in the northwest European other for storage. Northwest Europe was even quieter, with market, but no ships at all on subjects according to market no ships on subjects at the end of the trading session, ac- participants. cording to market participants. The UK continent to US Atlantic coast rate softened by In the Handysize market, demand was moderate, but WS7.5 points to WS112.5, as did the transatlantic rate from insuﬃ cient to stop rates from sliding further as the weak- the Mediterranean, as lacklustre demand led to pressure ness in the MR market has also allowed charterers to remain on rates. In the Mediterranean, Saras booked a ship from ﬂ exible with the size of ship they choose. The cross-Medi- Sarroch, Italy to the US Atlantic coast at WS115, with several terranean rate fell by WS5 points to WS125. The Black Sea

Clean 35,000t South Korea-Singapore $ lump sum Clean: MEG-Japan 55kt Worldscale

1,000,000 500

900,000 400 800,000 300 700,000

hhhhhhhhhhh hhhhhhh 600,000 200

500,000 100 400,000

300,000 0 29 Nov 19 3 Feb 20 2 Apr 20 8 Jun 20 5 Mar 20 3 Apr 20 6 May 20 8 Jun 20

to Mediterranean rate was an exception, as it rose by WS2.5 LPG freight rates points to WS147.5. Vitol booked the Aegeas on the route Route Size $/t at this rate. Coral Energy booked the Allegra from Eleusis, Mideast Gulf-Japan VLGC 28.50 Greece to the Ukraine for $260,000. Houston-Chiba VLGC 56.50 In the LR markets, demand picked up substantially for Houston-east coast Mexico Handy 30.00 both LR1s and LR2s. But slight oversupply in the market still Houston-Flushing VLGC 29.00 Tees-Lisbon butane 1,800t 58.00 caused rates to drop. The Mediterranean to Japan rate fell Tees-ARA 1,800t 18.50 by $50,000 to $1.65mn. One charterer reportedly booked a ship from the Black Sea to Japan at $1.8mn. Crude and product tankers scrapped in 2020 LPG Class Total Average age Total DWT Very Large Crude Carrier (VLCC) 2 600,722 23.50 LPG market subdued Suezmax 2 253,056 21.00 A muted start to the week saw no ﬁ xtures, but discussions Aframax/Long Range 2 (LR2) 2 203,960 22.50 ongoing across the vessel classes. Panamax/Long Range 1 (LR1) 0 0 0.00 On VLGC's a Bharat Petroleum ﬁ xture was discussed for Handymax/Medium Range (MR) 3 136,756 24.33 Handysize 3 103,965 25.00 a 26-27 June loading in the Mideast to India. The Clipper Total 12 1,298,459 23.50 Wilma and one other VLGC were reportedly put on subs for Last updated 19 May 2020 employment out of the Mideast Gulf, but further details were kept under wraps. In the northwest European coaster market, Essar was heard to be looking for coverage for a 13-15 June loading split cargo out of Stanlow. No further information was heard on the potential deal, with discussions understood to be roll- ing into Tuesday.

LPG Mideast Gulf-Japan VLGC freight $/t Clean 37,000t UK continent-US Atlantic coast freight $/t

90.00 70.00

80.00 60.00

70.00 50.00 60.00 40.00 50.00 hhhhhhhhhhh hhhhhhhhhhh 30.00 40.00

30.00 20.00

20.00 10.00 29 Nov 19 3 Feb 20 2 Apr 20 8 Jun 20 29 Nov 19 3 Feb 20 2 Apr 20 8 Jun 20

DRY BULK Dry bulk freight rates Route Size ’000t $/t ±

Capesize rates dip slightly as week starts Panamax Capesize freight rates slipped back slightly on Monday as fi x- Murmansk-Rotterdam 70 4.30 +0.20 ing activity was slow after the rush of bookings last week. Richards Bay-Rotterdam 70 6.90 -0.40 Sentiment among owners in the Capesize market was Puerto Bolivar-Rotterdam 70 7.60 -0.40 eroded by news that Brazilian iron ore producer Vale’s op- EC Australia-Japan 70 8.35 nc EC Australia-S Korea 70 8.20 nc erations at Itabira's Conceicao, Caue and Periquito mines had EC Australia-S China 70 7.60 nc been suspended. Brazil has been the main driver of higher EC Australia-EC India 70 10.40 nc Capesize rates in 2020 and the news exerted some pressure Indonesia-S China 70 4.20 nc on the market. Indonesia- EC India 70 5.70 nc Vale has maintained its annual output guidance of Indonesia-Japan 70 4.50 nc 310mn-330mn tonnes, and in any case it has been largely Indonesia-South Korea 70 4.30 nc absent from the Capesize spot market in 2020 as the major- Capesize ity of its material is now carried on VLOCs that it charters Richards Bay-Rotterdam 150 3.80 +0.20 in long-term deals. But the news of the suspensions still Puerto Bolivar-Rotterdam 150 4.30 +0.20 caused some concern in the market. It is the largest iron ore EC Australia-S China 150 6.60 +0.10 Richards Bay-S China 150 6.60 +0.20 producer in Brazil by a substantial margin and any impact to Richards Bay-Krishnapatnam 150 4.90 +0.20 its exports could aff ect the market as a whole. Saldanha Bay-Qingdao 160 7.50 +0.20 The cost of freight between Tubarao and Qingdao slipped WC Australia-N China 160 5.60 -0.40 15¢/t lower to $11.30/t with charterers slow to commit to Tubarao-Antwerp 160 3.75 +0.05 bookings. The rate rose substantially last week and the time Tubarao-Qingdao 160 11.30 -0.15 charter equivalent level is now at $7,035/d — above estimat- Queensland-Rotterdam, 02 Jun 160 6.60 -0.50 ed operating costs of $7,000/d. Shipowners are likely to be resistant to prices returning below operating costs. Weekly Americas coal rates 8 Jun Size The cost of freight between west Australia and north Chi- Route $/t ± 1 Jun ’000t na fell 40¢/t to $5.60/t as charterers picked up at least four vessels at this level. Australian exports have been robust for Panamax some time, but last week's rate increases on the route were US east coast-ARA 75 6.00 +0.25 driven mainly by momentum in the Brazilian market pulling US east coast-Japan 75 22.50 +3.25 US east coast-India 75 20.75 +3.25 ships away from the Pacifi c basin. Rates could come under West coast North America-ARA 60 15.25 nc renewed pressure if momentum in the south Atlantic slows. West coast North America-Japan 75 9.00 nc US Gulf-ARA 70 7.0 0 +0.25 Capesize US east coast-ARA 140 5.25 +0.75 US east coast-India 140 16.00 +2.75

Dry bulk vessels scrapped in 2020 Petroleum coke freight rates Class Total Average age Total DWT Route Size ’000t $/t ±

Very Large Ore Carrier (VLOC) 7 1,994,890 27.14 US Gulf-ARA 40-50 9.25 nc Capesize 19 3,178,363 20.95 Venezuela-ARA 45-50 8.25 nc Post-Panamax 0 0 0.00 US Gulf-Turkey 45-50 10.50 nc Panamax 4 300,119 30.75 USWC-Japan 60 12.75 nc Supramax 2 109,275 17.50 US Gulf-Brazil 45-50 8.50 nc Handymax 8 359,211 28.50 US Gulf-China 45-50 25.75 nc Handysize 8 230,003 27.38 US Gulf-east coast India 45-50 25.25 nc Total 48 6,171,861 24.85 EC Saudi Arabia-west coast India 45-50 7.50 nc Last updated 19 May 2020

News

Opec+ extra cuts will end in June very focused on the short term. Russia's oil minister Alex- Mideast Gulf countries that pledged deeper crude cuts ander Novak said it is too soon to decide whether to amend beyond their Opec+ commitments this month do not plan to the output deal following the expiry of the first phase, which extend these into July, Saudi oil minister Prince Abdulaziz is now at the end of July. bin Salman said on Monday. "As for August, it is too early to make any forecast. We Opec+ agreed on 6 June to extend to the end of July the took a decision about July and we continue to monitor the first phase of its two-year production restraint deal — which situation with the recovery of the demand, including air is to cut May-June production by 9.7mn b/d, largely from an transport, road transport," Novak said. October 2018 baseline — for all participants except Mexico. In addition to compliance with quotas, Opec+ will watch Saudi Arabia, Kuwait and the UAE pledged additional cuts "the current market situation, the monitoring of the speed in June, which would cap Saudi production at 7.49mn b/d, of demand recovery… and stocks, of course" he said, point- Kuwaiti output at or below 2.09mn b/d and UAE production ing out that global crude stocks rose "significantly" over the at around 2.35mn b/d. Non-Opec Oman pledged to take past few months. 15,000 b/d off the market in June, above its commitment. In By Rowena Edwards, Samira Kawar, Nader Itayim and total these will remove around 1.2mn b/d this month. Anastasia Krasinskaya These deeper voluntary cuts will not be extended into July, Prince Abdulaziz said on Monday. He said that they New Orleans ports reopened following storm have served their purpose and improved the atmosphere The US Coast Guard reopened New Orleans-sector ports among the group to encourage countries to act in a more today at around 2:30pm ET after closing them yesterday committed way. evening ahead of tropical storm Cristobal making landfall in The deal struck at the weekend hinges on countries Louisiana. that produce above their quotas in May and June making The Mobile-sector ports of Biloxi, the Gulf Intracoastal up for this non-compliance in the July-September period. Waterway, Gulfport, Mobile and Pascagoula remained open This means that overall cuts could exceed the 9.6mn b/d for with restrictions. The US Coast Guard didn't immediately July and the 7.7mn b/d planned for August and September, respond to requests for comment on the specifics of those Prince Abdulaziz said. He said that compliance will be self- restrictions. enforced, although the group's Joint Ministerial Monitoring Cristobal was downgraded to a tropical depression this Committee (JMMC) — which tracks observance — will meet morning. As Cristobal continues to move inland, heavy rains every month until the end of the year. It will next assemble are expected, according to the National Weather Service. on 18 June. US Gulf producers shut in nearly 35pc of oil output from Prince Abdulaziz, who chairs the JMMC, indicated that the region ahead of the storm. it will not come up with specific numbers for any additional By Michael Connolly cuts that over-producers would have to implement. He said that the compensatory amounts would be determined by Libya lifts force majeure on exports May and June output numbers provided by the secondary Libya has lifted force majeure restrictions on crude exports sources — of which Argus is one — that Opec uses to deter- from the 300,000 b/d El Sharara field and the 130,000 b/d- mine production numbers. capacity El Feel field, both of which have restarted after five But the minister said that he would not be tolerant to- months offline. wards non-compliers. State-owned NOC chairman Mustafa Sanalla said exports "We have no room whatsoever for lack of conformity," he will resume "as soon as possible." said. "We have no stomach for any types of laxities in terms El Sharara resumed operations on 6 June, an an initial of self-imposed obligations that need to be attended to." rate of 30,000 b/d, after the reopening of a valve on the The Opec+ agreement comes as Libya — which is exempt pipeline that connects the field with the port of Zawia. El from Opec+ output restraints — resumes production at its Feel, which depends on El Sharara for electricity supply, 300,000 b/d El Sharara field after a five-month shutdown. restarted on Sunday at a 12,000 b/d rate, NOC said. The Prince Abdulaziz said the Opec+ group will consider this company expects El Feel to reach output capacity within development, but that it would be unproductive to engage 14 days, although it is unclear if this means the field's full in discussion about it so soon. He said that the group can capacity or the largely 70-90,000 b/d levels observed prior accommodate an additional 300,000 b/d. to shutdown. Indeed, Monday's message from the Opec+ group was Production from El Feel is comingled with Wafa conden-

sate into the Mellitah blend crude grade and exported from remain evacuated fell to 179 out of a total of 643 manned the Mellitah oil terminal. El Sharara's crude grade Esharara is platforms in the region. That compares with 185 platforms shipped out of Zawia. The restarts could add up to 400,000 as of yesterday. b/d in the short term — El Feel typically produces 70,000- BP has started to resume normal operations at its four 90,000 b/d — but it is unclear how much will be available for operated platforms in the deepwater Gulf of Mexico, it said. export. Sanalla said crude is reaching the 120,000 b/d Zawia The major removed offshore personnel and reduced produc- refinery, which runs Esharara as its main feedstock. tion at the company-operated Thunder Horse, Atlantis and Combined shipments of Mellitah blend and Esharara aver- Na Kika facilities. Non-essential staff were evacuated from aged 243,000 b/d last year, according to Argus tracking data. its Mad Dog platform, but production remained unaffected. NOC last week raised official June-loading prices for Mellitah Shell said earlier today it will begin redeploying non-es- blend by $3/bl to a $1.65/bl discount to North Sea Dated, sential staff on board some of its US Gulf offshore facilities. while taking Esharara up by $3.10/bl to a 75¢/bl discount There was no impact on production as a result of the storm against the benchmark. and the major is set to resume activities in the region, Shell The majority of Libya's onshore oil fields and its export said. terminals have been offline since January, when the Libyan Cristobal continues to move further inland after making National Army (LNA) ordered shutdowns in the east of the landfall yesterday, with the center currently located over country as part of its attempt to seize control from the northeastern Louisiana, the National Hurricane Center said UN-backed Government of National Accord (GNA). A nascent in an update earlier today. peace initiative proposed by Egypt is yet to be accepted by Heavy rain will continue to push inland across the central the GNA, which recently recorded strategic victories at al- Gulf coast and into the lower Mississippi valley today, travel- Watiya and Tarhuna. ing up the mid- and upper-Mississippi valley tonight and Argus estimates Libyan production averaged below through tomorrow night, it said. 100,000 b/d in March, April and May, and exports have been Storm activity has had a more muted effect on oil and limited to sour grades Bouri and Al Jurf from offshore fields. natural gas prices in the past decade because so much The restarts come just as the 23-nation Opec+ coalition — in domestic output now comes from onshore fields. But storms which Libya participates without production restrictions that make landfall along the energy infrastructure-rich Gulf — has extended its output cuts to cover 9.6mn b/d in July, coast can still disrupt refinery operations and cause the largely against an October 2018 baseline. prices of transportation fuels to spike. Nymex WTI crude Saudi Arabia's oil minister Prince Abdulaziz bin Salman futures settled at $38.19/bl today. on Monday said that it was premature to discuss the Libyan The 2020 Atlantic hurricane season will likely have a developments as part of the group's strategy. higher-than-normal level of storms because of warm ocean "As long as they are way behind in terms of what they waters and lower wind shear, according to the National Oce- are going to be producing, I think it would be unfair and anic and Atmospheric Administration (NOAA). unproductive to engage them in their early days," Prince By Manash Goswami Abdulaziz said. "However, I think we have proven that we are accommodating enough to a very much bigger percent Vale keeps iron ore guidance after Itabira halt than 100,000 b/d here or 200,000 b/d there, or even 300,000 Brazilian iron ore producer Vale has maintained its annual b/d." output guidance of 310mn-330mn t after a court ordered it By Ruxandra Iordache and Nader Itayim to suspend mining at its 36mn t/yr Itabira complex in Minas Gerais to combat a growing Covid-19 outbreak. US Gulf operators restart production Vale suspended operations at Itabira’s Conceicao, Caue US offshore Gulf of Mexico oil production is starting to climb and Periquito mines in compliance with a 5 June decision as operators restart operations shut-in by tropical storm issued by the regional labour court of the third region that Cristobal over the weekend. reinstated the interdiction term issued by Minas Gerais Oil production shut-in stood at 629,351 b/d, or 34pc of labour officials, Vale said on 6 June. the region's total, the Bureau of Safety and Environmental The suspension may result in temporary shortage of pel- Enforcement said today. That compares with 635,781 b/d, or lets for the domestic market as the Itabira complex provides 35pc of the total, as of yesterday as Cristobal made landfall. pellet feed to the Tubarao complex, Vale said. But natural gas production shut-ins ticked higher today, “Considering the expected monthly production of 2.7mn touching about 952.3mn cf/d, representing 35pc of the total t from the Itabira complex for the coming months and the compared with 878.3mn cf/d yesterday, the bureau said. provisioning of up to 15mn t of losses associated with Co- As facilities get restaffed, the number of platforms that vid-19 in 2020, there is no need, at this moment, to revise

the guidance,” Vale said. and persistent supply woes. The ruling will remain in effect until a court rules on the Another market participant from China said that “steel merits of the interdiction or until Vale implements control demand outlook in China cannot be overseen” in determin- measures for Covid-19 as set by labour inspectors, Vale said. ing the iron ore price outlook despite the supply woes. It faces a daily fine of 500,000 real ($100,800) for non-com- “We are entering a period of monsoon and high tempera- pliance. tures in China and that will curb some of the downstream The Itabira complex, in Vale’s southeastern system, ac- activity further,” he said. counted for 36mn t, or 12pc, of the company’s 302mn t of By Deepali Sharma and China staff fines production in 2019 and 6mn t of Vale’s 59mn in the first quarter. Chad exports fall to multi-year low in July Iron ore prices at China’s ports, the seaborne market and Chad's crude exports will drop to 92,000 b/d next month, in the futures market rose on Monday as the market reacted the lowest since December 2017. to the Itabira suspension. The July exports will load on three cargoes, down from Australian mainstream Pilbara Blend (PB) fines prices hit the four planned in this month, loading programme show. 800 yuan/wet metric tonne (wmt) ($113/wmt)) at Tangshan, Chinese state-owned CNPC's local unit is listed as marketer while Qingdao prices rose to Yn795/t. The Argus portside of all three 950,000 bl cargoes, which will load on 10-11, 17- PBF index was at Yn764/t on 5 June. 18 and 25-26 July. Dalian commodity exchange September iron ore futures By Andy Devine rose over Yn790/t soon after their 9am opening on Monday, up from a close of Yn760/t at the end of the 5 June night Saudi July prices disappoint buyers in Asia session. Saudi Arabia’s official July price increases across the board The contract was at Yn783/t at 3pm Singapore time on sharply exceeded the expectations of Asia-Pacific and Euro- Monday. pean refiners. “The impact of the Itabira suspension is still within July-loading Saudi exports to Riyadh’s main sales region the previously expected range as the production target of in Asia were lifted by $5.60-7.30/bl on the month. The in- 310mn-330mn t is being maintained. Markets overreacted to creases were a disappointment to the region's refiners, who the news and portside prices shored up, with PB fines trad- had expected prices to be raised by $2-4/bl. The increase ing at Yn791-795/t over the weekend and moving up further may not necessarily lead to drastic region-wide cuts in term on Monday,” a Beijing-based trader said. Saudi crude that Asia-Pacific refiners plan to nominate for “There is no doubt that iron ore prices would remain July loading given limited supply alternatives. high in the near future, while the booming steel markets in Saudi state-controlled Aramco set the July formula prices China will also support the iron ore market,” he added. to Asia-Pacific for its main crudes Arab Extra Light, Arab A PB fines cargo in the seaborne market on Monday Light, Arab Medium and Arab Heavy at the highest levels in fetched $103.55/dry metric tonne (dmt) on a 61pc Fe basis four months. The July price hikes follow the 90¢-$1.70/bl on the Corex trading platform, up from a traded price of increases that Aramco made last month for the June formula $100/dmt on a 62pc Fe basis on the GlobalOre platform on 5 prices of these four grades destined for Asia-Pacific. June. A southeast Asian buyer said the Saudi July formula “The suspension at Itabira may mean that supply from prices were higher than they expected, with at least one Brazil will not improve as expected in the coming months,” a Indian refiner also surprised that the July prices had risen so market participant from China said. sharply from June. Several refiners in northeast Asia consid- Seaborne iron ore prices have been supported this year ered the July Saudi prices high and above their predictions, largely because of the persistent supply disruptions from although they added that it was not a total surprise given Brazil, caused by dam-related closures, record rainfall and the 6 June Opec+ agreement to extend the first phase of its Covid-19-related disruptions. historic two-year production restraint deal to the end of July Market participants have highlighted the risks to Vale’s for all participants except Mexico. Japanese refiner JXTG ability to meet its production guidance for the year because said its purchases in July will be unaffected by the rise in of the disruptions, while at the same time global steel July-delivery formula prices. production cuts and iron ore diversions to China have offset Asia-Pacific refiners have limited alternatives, as other some of the supply cuts. Mideast Gulf producers usually set their crude formula prices Argus 62pc Fe iron ore prices rose back above $100/dmt in line with Aramco. Cutting July term loadings could also be on 5 June, with the 65pc Fe fines index moving up to $115/ a risky move for refiners, because the trade cycle for July- dmt on the same day amid tight port inventories in China loading spot cargoes has largely ended, while spot prices for

August-loading cargoes may rise in the current environment price increases — assuming Kuwaiti KPC and Iraqi Somo of tighter Mideast Gulf supplies. continue their trend of moving in line with monthly Saudi Saudi crude provides base-load supplies for many refiners price adjustments — and tight alternative Urals crude avail- in Asia-Pacific, allowing Aramco to raise formula prices to abilities could push refiners to switch to a light-sweet crude the region. Asia-Pacific is Aramco's main market — over 70pc feedstock. of the 7.76mn b/d of Saudi crude that loaded during January- European nominations for Saudi crude were expected April headed to the region, according to Argus tracking. until Monday at 12:00 London time. Aramco usually gives But the rise in Saudi crude prices will hit Asia-Pacific the verdict on its allocation requests within a few days of refiners’ margins, as the region’s demand for refined oil nomination. products has not fully recovered. Certain countries such as Vietnam, Australia, New Zealand, Japan and South Korea are Niche North Sea crudes heading to China seeing some recovery, but demand in key markets like Indo- A cargo of niche North Sea crude grades Balder and Chestnut nesia and the Philippines remain weak. While gasoline and is preparing to head to China, which typically takes Forties jet-kerosine margins have firmed, and have been positive in from the region. the past week, they are still well below levels in February The 1mn bl Seoul Spirit completed two ship-to-ship (STS) and in the first half of March before the full impact of the transfers at Scapa Flow, Scotland, at the weekend and is Covid-19 pandemic hit oil demand. Some Asia-Pacific refiners readying to depart for China on Tuesday, according to the forced to reduce runs earlier this year amid falling demand local port authority. have begun to increase them again. But product demand is The Suezmax took Chestnut crude on board from the only starting to recover, and sharply higher crude feedstock Gijon Knutsen on 6 June and crude from the Norwegian costs could prompt refiners to consider run cuts again. Balder field via an STS operation with the Hilda Knutsen on Relatively high official formula crude prices may also Sunday. Oil analytics company Vortexa suggested that Balder lead to a flow of cargoes out of floating storage, if refiners crude accounts for around 821,000 bl of the Seoul Spirit’s are able to secure prompt supplies at cheaper prices. It is total cargo. unclear how much crude is in floating storage in Asia-Pacific, The tanker will follow the 2mn bl Eco Leader, which but volumes accumulated in the past few months when departed Mongstad, Norway, for Qindao in China at the the wide crude contango, with forward prices higher than weekend. It is unclear which crude was on board, although prompt prices, made storage feasible. The currently narrow- Mongstad is the loading terminal for Johan Sverdrup, a fa- ing contango could encourage sellers to push out volumes vourite North Sea grade with Chinese refiners. from storage, increasing regional availability. With European demand still weak as the continent slowly Aramco’s price hikes also shocked European and Mediter- re-emerges from Covid-19 related lockdown measures, North ranean refiners. The company bolstered its July prices by Sea crudes are finding unusual outlets. A cargo of Ekofisk -de $4.20-5.40/bl on the month, in what one refiner pegged as parted for New York late last week on the 600,000 bl Pacific double the expected hike. Aramco’s price increases could Treasures. Ekofisk last headed to New York in September last be part of the company’s strategy to discourage European year. nominations, given tight Saudi availabilities because of ongo- By Michael Carolan ing Opec+ production restraints, a buyer said. Towards the end of last week, market participants Abu Dhabi's Adnoc raises July formula prices anticipated that Aramco would lift July prices by $2/bl to Abu Dhabi's state-owned Adnoc has sharply raised the official the two regions. Aramco typically takes guidance from spot July formula prices of all of its crude exports, matching a sale prices for rival Russian sour grade Urals in the second move by Saudi state-controlled Aramco. half of the month that precedes the price issuance — Argus- Adnoc lifted the July formula price for its flagship light assessed prices for Baltic Sea Urals averaged $2.02/bl above sour Murban crude by $5.45/bl on the month, setting it at a North Sea Dated in that period, compared with $1.68/bl over $1/bl premium to the monthly average of front-month Dubai 1-15 May. Second-half May Argus assessments for Black Sea assessments. Adnoc's prices apply to exports to all destina- Urals were $1.06/bl above Dated, versus 81¢/bl above the tions, although most of its crude goes to Asia-Pacific. basis over 1-15 May. As has been its practice since it first released forward- One term buyer was considering at least lowering its looking official prices in March, Adnoc used Murban as the Saudi allocations commitment, as a result of Aramco’s price benchmark for its other three export grades. It set the July increases for Europe and the Mediterranean, where refinery formula price for its light sour Umm Lulu and Das crude at margins have struggled to keep up with recent upticks in parity and at a 35¢/bl discount to Murban, respectively, both crude differentials. A trader said that sharp Mideast Gulf unchanged from the differentials in June. This equates to a

$1/bl premium to Dubai for Umm Lulu and a 65¢/bl premium that overproduce in May and June making up for their non- to Dubai for Das, with both grades' differential to Dubai compliance over the course of the following three months. wider by $5.45/bl on the month. Aramco raised its July formula prices for northwest The company set the July formula price for medium sour Europe by $3.90-4.20/bl compared with June. For the Medi- Upper Zakum crude at parity to Murban, from a 50¢/bl pre- terranean, Aramco raised prices by $4.20-5.30/bl month-on- mium in the June formula price. Adnoc had set Upper Zakum month on a fob Ras Tanura basis, and by $4.30-5.40/bl on a at an unusual premium to Murban for the past two months. fob Sidi Kerir basis. These price increases were also higher The July Upper Zakum price equates to a $1/bl premium to than anticipated, with traders having expected Aramco to Dubai, higher by $4.95/bl from the previous month. raise prices for July-loading crude sold to northwest Europe This is the first time in four months that Adnoc has set and the Mediterranean by $2/bl, in line with recent strength the formula prices for all its crude exports at premiums to in the competing Russian Urals grade. Dubai. Aramco raised the July formula prices for its US custom- Adnoc's price increases were slightly smaller than those ers by 40-60¢/bl on the month. made by Aramco, which raised the July formula prices for By Fabian Ng Asia-bound shipments of its light sour Arab Extra Light and medium sour Arab Light crudes by $6.70/bl and $6.10/bl Saudi gasoil to Europe falters respectively. Saudi Arabia's exports of diesel and other gasoil to Europe The premium of Murban's July formula price to Arab are showing signs of faltering, after heavy traffic on that Extra Light narrowed by $1.25/bl month-on-month to 80¢/ route last month helped push northwest European diesel bl, and Upper Zakum's premium to Arab Light narrowed by premiums to crude down to 17-year lows. $1.15/bl on the month to 80¢/bl. Adnoc's light sour grades Only one tanker, carrying around 92,000t of diesel, has typically compete with Arab Extra Light, while Upper Zakum departed Saudi Arabia for Europe in June to date, according is comparable with Arab Light. to oil analytics firm Vortexa. This compares with 18 tankers, Adnoc had said that it will relax cuts to term crude nomi- carrying 1.55mn t of diesel and other gasoil, which departed nations for two of its main grades in July. on the route in all of May. That was the largest monthly By Fabian Ng amount since January 2019. This sign of contraction could reflect relatively robust Saudi Aramco lifts prices after Opec+ cuts demand in Asia-Pacific, which is drawing cargoes from Saudi Saudi Arabia has raised the official formula prices of its July- Arabia. Additionally, Saudi refiners are operating well below loading crude exports to buyers in all regions, with the larg- capacity since they cut output to meet lower domestic and est increases applied to cargoes bound for Asia-Pacific. The international demand caused by the Covid-19 crisis. price hikes come after the Opec+ alliance agreed to extend It probably also reflects poorer economics on the route existing production cuts by another month. to Europe. So far this month, 10ppm sulphur diesel cargoes State-controlled Saudi Aramco lifted the July formula delivered to northwest Europe have averaged an $8.01/t price of its flagship Arab Light crude sold to Asia-Pacific by premium to the same grade loading in the Mideast Gulf, by $6.10/bl on the month and raised the Arab Extra Light and Argus assessments. That is down from a $41.56/t average Arab Medium prices by $6.70/bl and $5.90/bl respectively. premium across the whole of May. All three grades were set at the same price of a 20¢/bl European gasoil markets have weakened as product premium to the monthly average of Oman-Dubai assessments released from storage has combined with large import flows — the first time they have been priced at a premium to the to overwhelm any gradual recovery in demand from eased benchmarks since March. lockdown restrictions. Northwest European French-grade Aramco increased the July Asia formula price for Arab diesel cargo premiums to North Sea Dated crude have aver- Super Light by $7.30/bl from the previous month to a $1.65/ aged just $4.04/bl so far in June, down from $6.26/bl in May bl premium to Oman-Dubai, while the Arab Heavy price was and $15.06/bl in April. raised by $5.60/bl to a 10¢/bl discount to Oman-Dubai. State-controlled Saudi Aramco's bookings with European The price hikes were steeper than anticipated, with discharge options have actually ticked up this month, ac- most buyers hoping Aramco would lift prices of its crude cording to shipping lists, but most of these tankers also have shipments to Asia-Pacific by just $2-4/bl. But supplies are Singapore options and are likely to head east. In June so far, expected to remain tight after the Opec+ alliance agreed front-month Singapore gasoil swaps have averaged a $1.45/ on 6 June to extend the first phase of its historic two-year bl premium to front-month Ice gasoil futures, up from 84¢/t production restraint deal to the end of July for all partici- in May. In April, the northwest European futures averaged a pants except Mexico. The deal is contingent on countries 97¢/t premium to the Singapore swaps.

Saudi gasoil exports have risen in the past two months, grades such as Akpo, Bonga, Bonny Light and Brass River, in partly in an attempt to avoid filling storage capacity as the subsequent six tenders. demand falls. Additionally, refineries are maximising gasoil IOC’s purchases already match the 245,000 b/d of crude production over jet fuel because demand for the latter is that left west African terminals to go to India in May, an lower still. unusually low figure reflecting the sharp drop in demand Saudi Arabia reimposed strict lockdown conditions in caused by Covid-19 lockdowns. The tallies for June and July Jeddah, the country's second-largest city, after a sharp rise exports to India are likely to rise, as IOC has yet to close the in new Covid-19 infections. Any resulting fall in vehicle use tenders it issued on 1 June. could free up more gasoil for export to Europe. Indian oil demand is showing faint signs of recovery, de- By Benedict George spite the recent extension of the lockdown to 30 June after a rebound in the number of coronavirus cases. New Delhi is China’s crude imports surge to new record relaxing a number of restrictions to revive economic activ- China’s crude imports rose to a new record high in May, after ity, allowing shopping malls, hotels and restaurants to open buyers loaded up on lower-priced cargoes in March and April from Monday, and domestic air travel resumed on 25 May. as demand rebounded following the worst of the country’s IOC’s preferred loading dates reveal signs of moderate Covid-19 outbreak. buying urgency. The refiner generally seeks cargoes load- Imports were 11.3mn b/d last month, rising above 11mn ing up to 80 days after it announces its tenders, but was b/d for the only the second time and exceeding the previous looking for June or early-July parcels in most of the recent record of 11.2mn b/d in November last year. tenders, circulated in the second half of May. May’s imports rose by 19.5pc from a year earlier and Renewed Indian demand has helped to partly reduce the were up by 14.8pc from 9.84mn b/d in April, preliminary growing overhang of unsold Nigeria cargoes and support val- data from China’s general customs administration (GAC) ues. Key grades such as Bonny Light and Qua Iboe have been shows. returning to premiums to Atlantic basin benchmark North Imports in January-May this year averaged 10.35mn b/d, Sea Dated. But high amounts of crude lingering in floating up by 4.5pc compared with the same period in 2019. storage offshore Nigeria and the slow demand recovery from Low prices helped boost China’s crude arrivals last European refiners — the main buyers of Nigerian crude — are month. The average import price for May was $27.04/bl, still limiting crude sales. less than half of 2019’s average of $65.63/bl, the GAC data Nigeria still has an issue with producing more than its show. The impact of the global Covid-19 epidemic, and the quota under the Opec+ agreement. It produced almost oil price war between Saudi Arabia and Russia, sent prices 200,000 b/d above its 1.41mn b/d allowance last month, sharply lower in March and April, when many of the cargoes and cargo loading schedules indicate that output could be that arrived in May would have been bought. even higher in June and July. Crude imports are likely to stay strong in June and July, Loading programmes for 18 Nigerian grades show around as lower-cost cargoes continue to arrive and the Chinese 1.74mn b/d scheduled for export in July, up from 1.71mn economy recovers from the impact of the coronavirus. b/d in June. This reflects an increase in the number of Crude prices have recovered, as Opec+ output cuts came cargoes to 57 in July from 55 this month and includes extra into effect from May and wereextended by another month shipments of Qua Iboe, Forcados, Akpo and Jones Creek. until the end of July. And Sunday’s move by Saudi Arabia Subtracting the Akpo condensate from these figures still to raise its July crude prices will further increase costs for leaves Nigerian crude exports above quota. Akpo loadings Chinese buyers. are scheduled at 67,000 b/d in June and 95,000 b/d in July, China exported no crude in May, the customs data show. leaving Nigerian crude exports at 1.64mn b/d and 1.65mn b/d over the two months, above even the less stringent India returns to buying Nigerian crude cargoes Opec+ target of 1.495mn b/d for August-December — and Indian refiners are seeking Nigerian grades again, which are the new deal agreed on 6 June is contingent on countries in plentiful supply as Abuja struggles to meet its Opec+ com- that over-produce in May and June making up for their non- mitments. compliance over the following three months. Actual produc- Indian refiner IOC on 11 May-1 June issued eight tenders tion does not always match planned loadings and NNPC and to buy light sweet crude loading mainly in June-July, the its partners still have time to revise some of the schedules. company’s first buy tenders for west African crude since Extra volumes could be partly offset by a drop in Bonga mid-March. The refiner did not award the first two, and may output. Shell began maintenance at the field’s floating have been testing offers and availability. But it bought at storage, production and offloading unit on 21 May, and it is least eight cargoes of west African crude, favouring Nigerian likely to last until July. But production disruptions to the

stream might be limited. Maintenance will entail only “a April’s level and the highest since December 2019. few days of total shutdown”, Shell said. Loadings of the The decline in RBCT's May exports was driven by lower grade are pencilled in at 127,000 b/d in June and 93,000 flows to India, which slumped by 60.1pc on the year to 2mn b/d in July. t amid the Covid-19-related slowdown. India accounted for By Nicola De Sanctis a 33pc share of South African exports in May, far lower than last year's average of 57.7pc. Petrobras hits new fuel oil export record Indian imports should recover over the coming months as Brazil’s state-controlled Petrobras exported a record the country’s economy restarts. But a sharp rise in seaborne 1.11mn t of fuel oil in May, marking a return to the com- purchases appears unlikely as the government has intensified pany’s focus on higher-margin fuel exports after the Covid-19 efforts to prioritise domestic coal sales due to record stocks pandemic scuttled the firm’s plans earlier in the year. with domestic producer Coal India. The monsoon season and Volumes exported in May were up 10pc compared with high inventories with power plants are also downside risks the previous 238,000 b/d, around 1mn t, record set in Febru- for imports, while labour shortages could weigh on industrial ary and marked a 230pc increase over May 2019. demand. Utilization rates at the Petrobras' 13 domestic refineries Due to the reduced Indian demand, South African sup- climbed to around 75pc earlier this month, just shy of the pliers diversified their exports in May. Buyers — particularly 79pc first quarter average, after touching 52pc in mid-April, those in Vietnam and Pakistan — took advantage of more spurred by demand for IMO 2020 compliant marine fuel. competitive prices to build stocks, while deliveries to South Resilient international demand for low-sulfur bunker has Korea and Turkey rose sharply on the year. Unusually for buoyed Petrobras’ upstream activities, particularly produc- recent months, suppliers also despatched cargoes to Egypt, tion of sweet light pre-salt crude. The company pumped France and Morocco. around 2.163mn b/d of crude in Brazil in April, down from Loadings for Vietnam surged by 1.4mn t on the year to 2.188mn b/d in March but up almost 12pc higher on the year. a record 1.6mn t, boosted by low hydropower stocks and Petrobras exported a record 1mn b/d of crude in April— a heatwave in the southeast Asian nation that has driven around 60pc headed to China—but says it is now focusing on power demand for cooling higher. But the recent bumper im- production of higher-margin fuel for export. ports mean Vietnamese buyers are now well stocked, which “The strategy of diversifying the destinations of fuel oil could weigh on future flows to this destination, a trading exports has shown to be effective in capturing greater par- firm said. ticipation in the foreign market,” the company said. Stockbuilding could also weigh on future Pakistani im- Total Brazilian fuel oil exports averaged 205,615 b/d in ports, as some firms took advantage of competitive prices April, down from a record 332,359 b/d in March but up by earlier in the second quarter to secure tonnage and are now 46pc from a year earlier, according to data from Brazilian overbooked, a buyer said. RBCT exports to Pakistan edged hydrocarbons regulator ANP. up by 4.9pc on the year to 746,000t last month, with South Petrobras dominates the Brazilian refining market, but African suppliers competing strongly to dominate Pakistani private producers are also gearing units toward fuel oil market share at the expense of Indonesian and Russian sup- production. ply. Riograndense, a Brazilian company that operates a Cumulative RBCT exports between January and May were 17,000 b/d refinery in southern Brazil, produced around 26.1mn t, down by 12.3pc on the year. Exports would need 1,400 b/d of fuel oil in the first four months of the year, a to average 6.6mn t/month for the remainder of the year to 53pc increase over the same period of 2019. match last year’s exports of 72.2mn t. Annual exports would reach just 62.4mn t if the January-May export rate is main- S Africa coal exports rebound tained for the duration of 2020. South African coal loadings rebounded in May but the out- Domestic supply and demand look for exports remains challenging. There should be no shortage of supply available for export Policy and seasonal obstacles could hamper demand from from RBCT for the remainder of the year, now that the min- India, even as the country emerges from lockdown, while ing sector is back up and running following lockdown-related recent stockbuilding in Vietnam and Pakistan could weigh on curtailments. near-term buying interest from these markets, which have Rail operator Transnet has postponed its 10-day annual acted as key sources of flexible demand during the second maintenance on the rail line to RBCT until January 2021, quarter. which should maintain supply to the port. And the lower The Richards Bay Coal Terminal (RBCT) exported 6mn t year-to-date exports have resulted in a stockbuild at RBCT. last month, down by 1.2mn t on the year but 2.3mn t above Stockpiles were about 5mn t last week, down by 350,000t

from early May but up from 2.8mn t in January. monia with carbon capture and storage (CCS), or by elec- Low export demand in March-April encouraged some trolysis of water from renewable power. It will also increase mining firms to divert flexible supply to the domestic market the share of biofuels in bunkers. but it remains to be seen whether this trend can continue. Earlier this year Equinor signed an agreement with ship- Utility Eskom — by far South Africa’s largest coal user — has owner Eidesvik Offshore to convert the LNG-fuelled Viking built up coal stocks amid a crash in domestic power demand. Energy supply vessel to test run on carbon-free ammonia As of mid-May, Eskom’s power plant stocks were sufficient from 2024. Viking Energy will supply installations on the for 55 days, above its 37-day target. Norwegian offshore. Domestic power demand fell to 20-25pc below last year The IMO has not yet adopted GHG regulations for ship- in early April but has recovered to a 10pc deficit in late May. ping, but plans to publish a revised strategy in 2023. Until Overall year-to-date power demand is running at 8pc below then, it calls for reducing CO2 emissions by at least 40pc by last year, based on Eskom figures. 2030 and by 70pc by 2050, all compared with 2008 levels. After slumping to a multi-year low in December 2019 due By Erik Hoffmann to disruptions caused by flooding, South African coal production recovered by 5.2pc on the year and by 6.3pc on the Tight quotas curb China’s coal imports quarter to 63.6mn t in the first quarter of 2020, government China’s overall coal imports fell sharply in May as expiring data show. quotas for imported coal dampened buying by utilities and March production was relatively flat to February 2020 traders. and March 2019 at 21.6mn t, although the lockdown mea- The imports, which include anthracite, coking coal and sures' effects on mining output are unlikely to be shown until thermal coal, fell by 20pc on the year to 22.06mn t in May, April and May data are released. according to preliminary customs data. By Alex Thackrah But cumulative imports over the first five months of the year rose to 148.71mn t, up by 17pc from the year-earlier Equinor to halve maritime emissions in Norway period, given record shipments in January-April against the Norway's state-controlled Equinor aims to halve its maritime same period last year. greenhouse gas (GHG) emissions in the country's waters by Chinese utilities were forced to slow booking of imported 2030, compared with 2005 levels, by developing, producing coal last month amid limited quotas and adequate — but and using more low-carbon and zero-emission marine fuels. more expensive — domestic supply. Major state-controlled The company also aims to halve its global GHG emissions power generator Guodian’s plants in Jiangsu and Fujian by 2050, compared with 2008 levels, which is in line with provinces in April have delayed a few April-arriving cargoes targets set by the government and with the International and defaulted on almost all May and June arriving cargoes Maritime Organisation's (IMO) initial decarbonisation strat- that they had awarded through tenders. A number of coastal egy. plants expect to exhaust their 2020 quotas by July or Au- Maritime emissions make up 6pc of GHG emissions in gust. Norway, and 2-3pc of GHG emissions globally, the firm said. The curbs were kept up on imported coal despite stron- Equinor said it aims to produce and use more low-sulphur ger coal consumption and the government-ordered suspen- fuels by 2030, and to "strongly increase" its production and sion of production at domestic mines during China’s two use of zero-emission fuels by 2050. It said it is developing annual, national political conferences held last month. All and taking delivery of more fuel-efficient ship types, and it these developments helped to buoy domestic and imported will increasingly burn alternative fuels such as LNG and LPG. coal prices. Equinor has signed long-term contracts for 30 more fuel- Coal burn at major power plants in China’s coastal re- efficient tankers since 2015, and will enter into agreements gions averaged 628,000t/d in May, up from the average coal for an additional 10 between 2020-22. It expects the carbon burn of 552,000 t/d in April, according to data released by intensity of its fleet to be 45pc lower in 2025 than in 2008. coal industry association the CCTD. Taken as a measure of emissions per unit of economic activ- The prices of Indonesian NAR 3,800 kcal/kg (GAR 4,200) ity, or grams per megajoule (g/MJ), LNG and LPG have CO2 coal, the most liquid physical market for seaborne thermal g/MJ savings of about 21pc and 15pc compared with con- coal, rose to $29.37/t fob on 29 May from $24.24/t on 30 ventional bunker fuels like heavy fuel oil and marine gasoil, April amid tighter supply, according to Argus assessments. according to shipping classification society DNV GL. China’s imports for the next a few months could continue Equinor will use hybrid fuel systems with LNG, LPG and to be curbed by expiring quotas as well as the restrictions batteries to reduce emissions in the mid-term. Longer-term imposed recently against Australian coal. Several coastal it will develop zero-emission fuels such as hydrogen and am- regions work with overall quotas for their area of jurisdic-

tion, while other coastal regions have broken down the By China staff regional quotas into quotas for individual plants. A few state-controlled utilities were ordered in mid-May by Beijing Brazil’s ethanol imports decline, exports rise to suspend coal imports from Australia, amid growing politi- Brazil’s ethanol imports fell in May because of declining cal tensions between the two countries. consumption in the domestic market, while biofuel exports Coal shipments from major Australian ports have started increased. to reflect the impact of China’s restrictions. Shipments from Ethanol imports decreased by 76pc in May in annual com- the two Port Waratah Coal Services' terminals at Newcastle, parison to 42.9mn l, which was 70pc below the total posted Australia, hit a 2½-year low of 6.93mn t in May amid low in April, according to Brazil's trade ministry MDIC. demand, as well as storms, rail maintenance and the slowing Also in May, biofuel exports rose by 18pc over the same of production by some mining firms. period last year, reaching 158.5mn l, compared to 81.6mn l The two largest coal export facilities in the Australian in April. state of Queensland — Gladstone port and Dalrymple Bay By Lara Leal Coal Terminal — were on track to report multi-year shipping lows for May. Each of the ports were on track to ship less Brazilian crude wave pressures Portugal storage than 4mn t in May, well behind the monthly average in 2019 Portugal's imports of Brazilian crude in the first four months as a result of weaker demand. of this year were nine times the level of a year earlier, as the country's integrated Galp took more of its own produc- China’s iron ore imports fall by 9pc tion. China’s iron ore imports fell by 9pc in May from a month But this meant that Galp struggled to curb crude imports earlier on slower shipments from Brazil but rose by around for April in line with the Covid-19 drop in demand for its 4pc from a year ago when both Brazil and Australia were hit products, and it halted fuels production at its 110,000 b/d by supply disruptions. Porto refinery in the first half of the month and its 220,000 Chinese imports of iron ore fines, lump, pellet and con- b/d Sines refinery on 4 May as storage space ran low. It has centrate rose to 87.03mn t in May, up by 3.9pc from a year said it plans to restart both plants this month. earlier, according to preliminary customs data. This is down Galp first directed a higher share of its 116,000 b/d of from April imports of 95.71mn t. Brazilian crude production towards its own refineries in The country’s January-May imports increased by 5.1pc January, in order to utilise more of the sweet crude in pro- to 445.3mn t from 424mn t during the same period a year duction of marine fuel oil. At the start of the year the firm earlier. switched to 100pc very low-sulphur product as it strove to Shipments from Brazil slowed in May as Brazilian mining meet International Maritime Organisation (IMO) limits. Later, firm Vale struggled to increase production following a dam Galp faced difficulties with placing its Brazilian production accident and heavy rains last year, as well as the Covid-19 with clients in Asia-Pacific when demand fell as the Covid-19 outbreak now. Vale has lowered its 2020 guidance to 310mn- pandemic escalated. 330mn t from 355mn t and halted its 6.2mn t/month Itabira Portugal imported 66,000 b/d on average from Brazil in mining complex. the first four months of the year, including a record 96,000 Brazil exported 21.6mn t of iron ore in May, down by b/d in March and 65,000 b/d in April, and this drove a 24pc 11pc from April and by 28pc from a year earlier, the coun- increase in total imports over the same period to 260,000 try’s latest customs data show. b/d, according to Portugal's general directorate for energy Iron ore inventories at Chinese ports fell to around DGEG. 107mn t last week, the lowest level since late 2015, indus- Overall crude imports, which all usually go to Galp's re- try data show. China’s near-record steel production in May fineries, were 231,000 b/d in April, down by 31pc from March has kept seaborne iron ore supply tight, even despite steel but up by 18pc on the year. Demand for road and jet fuel in production cuts in other regions. “Chinese steelmakers are Portugal fell by 59pc on the year in April. ramping up production as the country tries to revive eco- Portugal received 23,000 b/d of UK crude and 19,000 b/d nomic output and catch up with delayed projects following from Denmark in April, along with 19,000 b/d of US crude, the Covid-19 outbreak,” a north China mill manager said. the first such since January. This partly offset sharply lower The Argus ICX 62pc fines index ranged from $83.65- imports from west Africa. 100.75/dmt in May, rising above $100/dmt on 29 May for the By Jonathan Gleave first time since August 2019.

Argus Mexico Fuel Markets It’s about time. A unique look into Mexico’s fast-changing refined products market. Argus US Products: proven Daily delivered prices for gasoline, methodology,trusted prices, diesel, blendstocks and LPG, along now at 3:45. with news and analysis.

argusmedia.com/345

For more information, please contact us at [email protected] Market Reporting Petroleum Consulting illuminating the markets Events

Argus Freight is published by Argus Media group

Registered offi ce Trademark notice Publisher Customer support and sales: Lacon House, 84 Theobald’s Road, London, WC1X 8NL ARGUS, the ARGUS logo, ARGUS MEDIA, INTEGER, Adrian Binks [email protected] Tel: +44 20 7780 4200 ARGUS FREIGHT , other ARGUS publication titles and [email protected] Chief operating offi cer ARGUS index names are trademarks of Argus Media Matthew Burkley London, UK Limited. Visit www.argusmedia.com/Ft/trademarks for ISSN: 1751-309X Tel: +44 20 7780 4200 more information Global compliance offi cer Copyright notice Jeff rey Amos Astana, Kazakhstan Copyright © 2020 Argus Media group Disclaimer Tel: ++7 7172 72 92 94 Chief commercial offi cer All rights reserved The data and other information published herein (the Beijing, China Tel: +86 10 6598 2000 All intellectual property rights in this publication and the “Data”) are provided on an “as is” basis. Argus and its Jo Loudiadis licensors (including exchanges) make no warranties, Dubai Tel: +971 4434 5112 information published herein are the exclusive property Global SVP editorial of Argus and/or its licensors (including exchanges) and express or implied, as to the accuracy, adequacy, Neil Fleming Moscow, Russia Tel: +7 495 933 7571 may only be used under licence from Argus. Without timeliness, or completeness of the Data or fi tness for Sao Paulo, Brazil limiting the foregoing, by accessing this publication any particular purpose. Argus and its licensors (including Editor in chief Tel: +55 11 3235 2700 you agree that you will not copy or reproduce or use exchanges) shall not be liable for any loss, claims or Jim Washer any part of its contents (including, but not limited to, damage arising from any party’s reliance on the Data Singapore Tel: +65 6496 9966 single prices or any other individual items of data) in any and disclaim any and all liability related to or arising out Managing editor Andrew Bonnington Tokyo, Japan Tel: +81 3 3561 1805 form or for any purpose whatsoever except under valid of use of the Data to the full extent permissible by law. licence from Argus. Further, your access to and use of Argus Media Inc, Houston, US Editor Tel: +1 713 968 0000 data from exchanges may be subject to additional fees All personal contact information is held and used in Will Collins and/or execution of a separate agreement, whether accordance with Argus Media’s Privacy Policy Tel: +44 20 7780 4226 Argus Media Inc, New York, US directly with the exchanges or through Argus. https://www.argusmedia.com/en/privacy-policy [email protected] Tel: +1 646 376 6130

Transportation illuminating the markets