Tuesday Mar 18, 2025

Episode 30: At the crossroads of oil and freight

This special episode of the Sparta Market Outlook Podcast, 'At the crossroads of oil and freight', focuses on the intersection of freight markets and oil trading. It offers an in-depth analysis of current trends, disruptions, and geopolitical influences shaping global shipping and commodity flows.

Recorded live in Singapore on 18th March 2025, the episode features host Felipe Elink Schuurman, co-host June Goh, and special guest Anoop Singh, Global Head of Shipping Research at Oil Brokerage Ltd, specialising in freight.

📌 Here are the key takeaways:

🔷 Freight Market Resilience: Despite disruptions like the Red Sea crisis, freight rates remain robust, particularly for LR2s and VLCCs, due to tightened vessel supply and sustained demand. Traders should monitor physical flows over paper market signals, as the latter may not fully reflect real-time shifts (e.g., TC5 freight strength despite ARB fluctuations).

🔷 Sanctions as Opportunities: OFAC sanctions and potential tariffs create arbitrage opportunities, especially for VLCCs transporting Atlantic Basin crudes to Asia. However, traders must account for volatility in sweet-sour crude spreads and the risk of sanctions unwinding (e.g., Russia-Ukraine resolution).

🔷 Geopolitical Wildcards: USTR fees on Chinese-built ships could significantly tighten vessel supply, driving up freight costs and creating a bullish outlook for traders with access to non-Chinese fleets. Conversely, tariffs may dampen global growth, softening long-term freight demand.

🔷 Refining Shifts: New refineries like Dangote reduce clean tanker demand (e.g., 80 MRs net negative impact), while European closures increase reliance on Eastern Suez barrels, boosting LR1/LR2 demand. Traders should watch quality differentials and currency risks (e.g., Naira exposure) in these regions.

🔷 Fleet Dynamics: The aging tanker fleet and incoming deliveries (e.g., 65 Aframax/LR2s, 39 Suezmaxes in 2025) suggest a softening of rates unless offset by demand shocks or scrapping. VLCCs offer a hedge against midsize tanker volatility, especially if Iran sanctions escalate.