Tanker rates cool off slightly as Red Sea tensions escalate further.

Suezmax rates cooled off slightly, however, activity picked up at the end of the week, particularly in the US Gulf. Overall, owner sentiment remains positive as continuing developments and escalations in the Red Sea drive elevated tonne-miles due to diversions around the Cape of Good Hope.

Over the weekend, news broke that three US soldiers were killed, with a further 34 injured following a drone strike on a facility in Northeastern Jordan. The attack has been claimed by the Iranian-backed militia group “The Islamic Resistance in Iraq”. The potential for escalations is significant and, in an extreme case, could risk a wider avoidance of the Strait of Hormuz, key for loading oil and LNG cargoes from the Middle-East Gulf.

Aframax markets were also slightly softer, with the UK Continent tonnage list expanding throughout the week. The softening was counter to expectations, given that charterers struggled to secure end-month positions at the start of the week. One area of strength was the Mediterranean, where rates rose as the tonnage list in the region shortened.

“Tanker rates soften after recent gains; however, continuing conflict escalations in the Middle East structurally support tonne-miles.”

VLCC rates trended lower as charterers benefitted from operating primarily off-market. The week ended with no on-market activities.

LR2 rates continued their recent surge this week amid the ongoing situation in the Red Sea. The Middle East Gulf to UK Continent route reached its second highest level on record, with rates reaching $129,503/day. The exceptional LR2 rates and utilization will prevent the cannibalization of LR2s into the Aframax market.