FIS: Tanker Market Overview: Fiesta for MRs due to higher South American diesel demand
Tanker freight rates continued to rise for medium and smaller vessels amid the Russia-Ukraine war that disrupted shipping routes and loadings.
The Medium Range (MR) time charter equivalent has soared due to the conflict, as many trade participants have self-imposed sanctions on Russian gasoil and imports, opting for South American diesel instead.
As such, the time charter of MRs has risen over 60% for the second quarter, fixing at around $25,500 per day, compared to $15,000 per day fixed during Q1, according to a Platts report.
More trade participants were keen for long-haul voyages from the USGC to Europe and from the East of Suez markets to both Europe and South America, with the latter bringing diesel to Europe from the Caribbean and South America.
This trend may continue as the Russia-Ukraine war drags on, bringing in tougher measures by the G7 and the EU to phase out Russian crude imports within six months, and oil products by the end of the year.
This may result in the EU shipping in an additional 1.5 million bpd of diesel to replace their reliance on Russian crude products, increasing tanker demand.
Moreover, oil refiners will support growing tanker demand, as export-oriented developing country refinery capacity is expected to grow by an estimated 8.5 million bpd from 2022 to 2026, in comparison to the refinery closures of 5.9 million bpd in the mature markets of the US and Europe.
Technical view of the tanker market (TD3C):
June Futures – Technically bullish with price testing a key support level, the RSI is above 50 and the stochastic oversold.
Momentum had warned that the futures were vulnerable to a test to the upside. However, if the RSI moved below 50 then and price below 9.5481, we could expect support levels to come under pressure.
The price has moved lower and the May contract now has a neutral bias. We are seeing a similar technical footprint in the June contract: a deep pullback means the futures have a neutral bias.
The price is below all key moving averages and supported by the RSI below 50.
Upside moves that fail at or below USD 10.9054 will warn that the futures are vulnerable to further tests to the downside. Above this level we target the USD 11.8210 high.
Likewise, a close below USD 9.0323 will warn that the USD 8.2730 support could be tested.
The slope of the moving average on the RSI is to the downside, suggesting resistance levels (USD 10.1567, USD 10.4745, and USD 10.9054) should hold in the near term if tested.
Note: a strong upside move in the RSI could change the slope to bullish on the RSI, meaning resistance levels could hold initially, but find buying support at lower levels.
Technically neutral.
Written by Titus Zheng Shujian and Edward Hutton, Edited by Chris Hudson (https://freightinvestorservices.com/fis-live/).
