Everything is priced up in theory but the problem is the supply. A lot of countries are accumulating for self-sufficiency and leaving others short.
Commentary
Everything is priced up in theory but the problem is the supply. A lot of countries are accumulating for self-sufficiency and leaving others short.
OVERVIEW
Everything is priced up in theory but the problem is the supply.
A lot of countries are accumulating for self-sufficiency and leaving others short. This tightening supply landscape has been further exacerbated by rising bunker costs, with the industry estimated to have absorbed over €4.6bn ($5.29bn) in additional fuel costs within just three weeks of the conflict, reinforcing inflationary pressure across freight markets.
Source: Transport & Environment Data Group
Flows through the Strait of Hormuz remain uncertain, with selective vessel approvals and partial rerouting via alternative terminals such as Yanbu reducing effective export capacity. At the same time, major Asian importers are increasingly shifting toward defensive procurement strategies, as reflected in reduced Saudi allocations into China and India and opportunistic purchases of discounted Russian barrels.
IEA member countries have committed to releasing 400 million barrels of oil, predominantly crude, with only a limited portion expected to support the aviation sector based on past trends. As a result, jet fuel prices have surged to record highs—significantly outperforming crude and other products—with European jet fuel reaching about $1,713.50 per ton (approximately $215 per barrel).
China’s crude sourcing strategy continues to evolve, with a clear shift away from reliance on traditional Middle East suppliers toward a more diversified mix including Russia, Brazil, and other Atlantic Basin producers. At the same time, China has tightened its refined product export quotas, effectively limiting outward flows of gasoline, diesel, and jet.
Meanwhile in South Korea, the disruption in naphtha supply, a key feedstock for petrochemical production, is forcing its producers to consider output cuts, with LG Chem already announcing a temporary shutdown of one of its cracking units. As South Korea relies on the Middle East for roughly half of its naphtha imports, any prolonged conflict is expected to have wider implications for its economy.
In the MR segment, market performance last week reflected this imbalance. Baltic route assessments showed mixed movements, with TC11 (Korea–Singapore) and TC10 (Korea–US West Coast) easing slightly, while TC12 (West Coast India–Japan) recorded modest gains. Time charter equivalent earnings improved, with the MR Pacific basket rising to approximately $31,000 per day , though this increase is largely attributable to operational inefficiencies and elevated bunker costs rather than a significant strengthening of cargo demand.
MR MARKET OUTLOOK FOR THE NEXT 5-7 DAYS
Looking ahead, the MR market appears to be entering a consolidation phase following the sharp volatility observed earlier in March. However, this should not be interpreted as a demand-led stabilisation. Current freight levels are holding primarily because owners are resisting downward pressure, supported by elevated bunker costs and ongoing inefficiencies, rather than an improvement in cargo fundamentals.
Worldscale levels across key routes such as Singapore–Japan, Singapore–Australia, and Korea–Australia are broadly stabilising in the WS240–280 range, with only limited upward movement in recent sessions. The India–Japan route, which previously experienced a sharp spike, has since corrected, indicating that earlier strength was driven by short-term dislocation rather than sustained structural demand.
In the near term, reduced Chinese product exports remove a key source of CPP cargoes in the region. This will result in softening intra-Asia MR demand and contributing to the current imbalance between vessel supply and cargo availability.
From a freight perspective, the implications are twofold. Structurally, increased sourcing from longer-haul regions supports tonne-mile demand. However, in the near term, reduced Chinese product exports remove a key source of CPP cargoes in the region, softening intra-Asia MR demand and contributing to the current imbalance between vessel supply and cargo availability. At the same time, China’s flexibility in switching crude suppliers reduces urgency for Middle East liftings, capping upside for certain routes despite the prevailing geopolitical risk premium.
Meanwhile, Japan trade minister has indicated that any release of oil from strategic reserves will primarily be directed toward domestic refiners, reinforcing the country’s priority on safeguarding its own energy security. While there remains some flexibility regarding jointly held reserves with oil-producing nations, any decision to extend support externally will be assessed on a case-by-case basis depending on market conditions. Japan has already begun drawing down its stockpiles this month to alleviate supply disruptions caused by the effective blockage of the Strait of Hormuz, a critical route for its crude imports. The government is also in discussions with the International Energy Agency on the possibility of a further coordinated release, should supply constraints persist.
Time charter equivalent earnings remain relatively well supported, particularly on longer-haul routes such as Korea–US West Coast, while regional routes including Korea–Singapore and Korea–Japan are holding within a stable range. This suggests that earnings resilience continues to be driven by voyage inefficiencies, extended ton-mile demand, and elevated bunker costs, rather than a material increase in cargo volumes.
The LR market (AG–Japan) also provides useful context, with LR1 and LR2 rates easing from recent peaks but remaining elevated overall. This reflects ongoing supply-side constraints in the Middle East, albeit without further tightening. In this context, the MR market is expected to remain broadly stable over the next five to seven days, with a mild firm bias.
Upside potential is likely to be limited in the absence of renewed geopolitical escalation or a clear recovery in cargo programmes, while downside is supported by persistently high bunker costs and continued inefficiencies in vessel deployment. Regionally, North Asia may continue to show gradual improvement, while Singapore-controlled routes are expected to remain largely range-bound. Overall, the market is expected to remain balanced, characterised by stability rather than a decisive directional trend.
SMALL TANKERS OVERVIEW
The regional market continues to soften amid weak cargo visibility and increasing tonnage supply, though freight remains supported by elevated bunker costs. In Southeast Asia, Intra-SEA activity stays limited, with most vessels open through early April and demand largely confined to CPP movements, while additional ballasters returning from West Coast India add further pressure to an already soft market.
Northbound sentiment remains subdued, with early April positions struggling to secure completion cargoes and owners facing margin pressure on previously fixed voyages due to rising fuel costs. In the Far East, Intra-FEAST conditions are showing clearer signs of softening, as early-April positions emerge without firm employment and production cutbacks across major Korean producers threaten to reduce cargo availability further. Southbound activity remains relatively steady with MTBE, toluene, caustic soda, and acids, though demand is cautious amid high inventory levels. Westbound freight remains elevated, supported by bunker costs and weak backhaul prospects, with owners continuing to price in repositioning risks. Overall, market sentiment is soft, with growing tonnage outpacing demand, while freight levels remain firm but increasingly disconnected from underlying cargo fundamentals.
Some owners are also facing margin pressure, as shipments fixed three to four weeks prior to laycan—at pre-conflict freight levels—are now being performed against significantly higher bunker costs. This has eroded returns on previously concluded fixtures, adding further strain to an already challenging market environment.
On the Intra Far East supply side, emerging production cutbacks are adding further pressure. LG Chem in Yosu has reportedly halted operations earlier this week, followed by Lotte, with YNCC also expected to suspend operations in the coming week. In addition, Hyundai in Daesan is planning to reduce BTX production next month. If these developments persist, cargo availability is likely to decline further, leading to a buildup in tonnage and increasing downward pressure on utilisation levels in the region.
Westbound movements toward West Coast India continue, albeit at elevated freight levels. A recent fixture was heard for a 13kt chemical cargo on a 2:1 basis from FEAST to WCI at around $100/mt. Owners are factoring in not only higher bunker costs but also the strong likelihood of ballasting back to the Straits due to limited backhaul opportunities, which continues to support firmer freight indications on this route.
REPORTED FIXTURES
VESSEL
SIZE
GRADE
L/C
LOAD
DISCHARGE
FREIGHT
CHTRS
VNR
25
PALMS
1_Apr
Straits
Pakistan
HIGH $30S-LOW $40S
CNR
HUA WEI 8
27
UNL
26-Mar
Spore-Msia
Baubau
490K
PERTAMINA
FPMC 33
35
GO
24-Mar
Incheon
Vietnam
750K
PETROLIMEX
ARDMORE GIBRALTAR
35
UNL
1-Apr
Spore
Oz
WS255
BP
STI MARVEL
35
CPP
7-Apr
Korea
Oz
WS320
AMPOL
PETROKARAVO
55
NAP
31-Mar
R.SEA
Japan
WS370
ATC
PROTEUS HARVONNE
90
UMS
23-Mar
Korea
Spore
900K
CSSSA
BUNKER PRICE UPDATES
Bunker prices remain a central driver across all tanker segments. Singapore VLSFO averaged around $949/mt over the past week, while MGO levels remain elevated near $1,790/mt, reinforcing the cost floor for freight markets . Although there has been some stabilization toward the end of the week, bunker levels remain historically high, continuing to distort traditional supply-demand pricing dynamics and compress margins for owners operating on pre-conflict fixtures.
News & Commentaries
Everything is priced up in theory but the problem is the supply. A lot of countries are accumulating for self-sufficiency and leaving others short.
Everything is priced up in theory but the problem is the supply.
A lot of countries are accumulating for self-sufficiency and leaving others short. This tightening supply landscape has been further exacerbated by rising bunker costs, with the industry estimated to have absorbed over €4.6bn ($5.29bn) in additional fuel costs within just three weeks of the conflict, reinforcing inflationary pressure across freight markets.
Source: Transport & Environment Data Group
Flows through the Strait of Hormuz remain uncertain, with selective vessel approvals and partial rerouting via alternative terminals such as Yanbu reducing effective export capacity. At the same time, major Asian importers are increasingly shifting toward defensive procurement strategies, as reflected in reduced Saudi allocations into China and India and opportunistic purchases of discounted Russian barrels.
China’s crude sourcing strategy continues to evolve, with a clear shift away from reliance on traditional Middle East suppliers toward a more diversified mix including Russia, Brazil, and other Atlantic Basin producers. At the same time, China has tightened its refined product export quotas, effectively limiting outward flows of gasoline, diesel, and jet.
Meanwhile in South Korea, the disruption in naphtha supply, a key feedstock for petrochemical production, is forcing its producers to consider output cuts, with LG Chem already announcing a temporary shutdown of one of its cracking units. As South Korea relies on the Middle East for roughly half of its naphtha imports, any prolonged conflict is expected to have wider implications for its economy.
In the MR segment, market performance last week reflected this imbalance. Baltic route assessments showed mixed movements, with TC11 (Korea–Singapore) and TC10 (Korea–US West Coast) easing slightly, while TC12 (West Coast India–Japan) recorded modest gains. Time charter equivalent earnings improved, with the MR Pacific basket rising to approximately $31,000 per day , though this increase is largely attributable to operational inefficiencies and elevated bunker costs rather than a significant strengthening of cargo demand.
Looking ahead, the MR market appears to be entering a consolidation phase following the sharp volatility observed earlier in March. However, this should not be interpreted as a demand-led stabilisation. Current freight levels are holding primarily because owners are resisting downward pressure, supported by elevated bunker costs and ongoing inefficiencies, rather than an improvement in cargo fundamentals.
Worldscale levels across key routes such as Singapore–Japan, Singapore–Australia, and Korea–Australia are broadly stabilising in the WS240–280 range, with only limited upward movement in recent sessions. The India–Japan route, which previously experienced a sharp spike, has since corrected, indicating that earlier strength was driven by short-term dislocation rather than sustained structural demand.
In the near term, reduced Chinese product exports remove a key source of CPP cargoes in the region. This will result in softening intra-Asia MR demand and contributing to the current imbalance between vessel supply and cargo availability.
From a freight perspective, the implications are twofold. Structurally, increased sourcing from longer-haul regions supports tonne-mile demand. However, in the near term, reduced Chinese product exports remove a key source of CPP cargoes in the region, softening intra-Asia MR demand and contributing to the current imbalance between vessel supply and cargo availability. At the same time, China’s flexibility in switching crude suppliers reduces urgency for Middle East liftings, capping upside for certain routes despite the prevailing geopolitical risk premium.
Meanwhile, Japan trade minister has indicated that any release of oil from strategic reserves will primarily be directed toward domestic refiners, reinforcing the country’s priority on safeguarding its own energy security. While there remains some flexibility regarding jointly held reserves with oil-producing nations, any decision to extend support externally will be assessed on a case-by-case basis depending on market conditions. Japan has already begun drawing down its stockpiles this month to alleviate supply disruptions caused by the effective blockage of the Strait of Hormuz, a critical route for its crude imports. The government is also in discussions with the International Energy Agency on the possibility of a further coordinated release, should supply constraints persist.
Time charter equivalent earnings remain relatively well supported, particularly on longer-haul routes such as Korea–US West Coast, while regional routes including Korea–Singapore and Korea–Japan are holding within a stable range. This suggests that earnings resilience continues to be driven by voyage inefficiencies, extended ton-mile demand, and elevated bunker costs, rather than a material increase in cargo volumes.
The LR market (AG–Japan) also provides useful context, with LR1 and LR2 rates easing from recent peaks but remaining elevated overall. This reflects ongoing supply-side constraints in the Middle East, albeit without further tightening. In this context, the MR market is expected to remain broadly stable over the next five to seven days, with a mild firm bias.
Upside potential is likely to be limited in the absence of renewed geopolitical escalation or a clear recovery in cargo programmes, while downside is supported by persistently high bunker costs and continued inefficiencies in vessel deployment. Regionally, North Asia may continue to show gradual improvement, while Singapore-controlled routes are expected to remain largely range-bound. Overall, the market is expected to remain balanced, characterised by stability rather than a decisive directional trend.
The regional market continues to soften amid weak cargo visibility and increasing tonnage supply, though freight remains supported by elevated bunker costs. In Southeast Asia, Intra-SEA activity stays limited, with most vessels open through early April and demand largely confined to CPP movements, while additional ballasters returning from West Coast India add further pressure to an already soft market.
Northbound sentiment remains subdued, with early April positions struggling to secure completion cargoes and owners facing margin pressure on previously fixed voyages due to rising fuel costs. In the Far East, Intra-FEAST conditions are showing clearer signs of softening, as early-April positions emerge without firm employment and production cutbacks across major Korean producers threaten to reduce cargo availability further. Southbound activity remains relatively steady with MTBE, toluene, caustic soda, and acids, though demand is cautious amid high inventory levels. Westbound freight remains elevated, supported by bunker costs and weak backhaul prospects, with owners continuing to price in repositioning risks. Overall, market sentiment is soft, with growing tonnage outpacing demand, while freight levels remain firm but increasingly disconnected from underlying cargo fundamentals.
Some owners are also facing margin pressure, as shipments fixed three to four weeks prior to laycan—at pre-conflict freight levels—are now being performed against significantly higher bunker costs. This has eroded returns on previously concluded fixtures, adding further strain to an already challenging market environment.
On the Intra Far East supply side, emerging production cutbacks are adding further pressure. LG Chem in Yosu has reportedly halted operations earlier this week, followed by Lotte, with YNCC also expected to suspend operations in the coming week. In addition, Hyundai in Daesan is planning to reduce BTX production next month. If these developments persist, cargo availability is likely to decline further, leading to a buildup in tonnage and increasing downward pressure on utilisation levels in the region.
Westbound movements toward West Coast India continue, albeit at elevated freight levels. A recent fixture was heard for a 13kt chemical cargo on a 2:1 basis from FEAST to WCI at around $100/mt. Owners are factoring in not only higher bunker costs but also the strong likelihood of ballasting back to the Straits due to limited backhaul opportunities, which continues to support firmer freight indications on this route.
Bunker prices remain a central driver across all tanker segments. Singapore VLSFO averaged around $949/mt over the past week, while MGO levels remain elevated near $1,790/mt, reinforcing the cost floor for freight markets . Although there has been some stabilization toward the end of the week, bunker levels remain historically high, continuing to distort traditional supply-demand pricing dynamics and compress margins for owners operating on pre-conflict fixtures.