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Tankers: Asia Aframax freight rates at year high on Iran sanctions, China crude oil quota

Singapore — Asian Aframax freight rates hit a new high for the year on a surge in loadings from both the Middle East and Southeast Asia as Chinese independent refiners get fresh crude oil import quotas, market participants said.

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The impending US sanctions against Iran, which are expected to hit Tehran's energy exports, have seen refiners rushing in to hire vessels to move large volumes of oil from the Middle East and regional markets.

Australia and China's penchant for lifting crude from Southeast Asia, where some grades need to be shipped at very high temperatures, with loading and discharges at multiple ports, has meant some Aframaxes are commanding high premiums.

S&P Global Platts Thursday assessed the key Indonesia-Japan Aframax route at Worldscale 137.5, up w12.5 on the day. As recently as a month ago the rates were struggling to break above w100, Platts data showed.

For most of this year, rates stayed below w100 and rose above this key psychological level on July 25, the first time in 2018. But fundamentals have now strengthened and strong demand and tight supply of Aframaxes is supporting the market across all regions.

Higher crude flows from Saudi Arabia and Russia will drive up activity and Chinese independent refiners are flush with new and larger import quotas, Ole-Rikard Hammer, an Oslo-based senior analyst with Arctic Securities, said in a recent report.

Fuel oil loadings from the Middle East for deliveries into North Asia have also pushed up demand for Aframaxes.

"Supply is tight for good quality ships," said a source with an Aframax owner, adding that special requirements in some Asian load ports had left charterers with fewer vessel choices.

Rates are also firming up in the Persian Gulf, a chartering source said.

Though owners' earnings are buffeted by firm bunker prices, at current rates owners are now earning upwards of $12,000/day on the Indonesia-South Korea route, according to broker estimates.

The earnings were around half this amount three months ago, brokers said.

--Sameer Mohindru, sameer.mohindru@spglobal.com

--Vickey Du, vickey.du@spglobal.com

--Edited by Jonathan Fox, jonathan.fox@spglobal.com