Atlantic Suezmax mini-rally to cool off as the year ends
Atlantic Suezmax rates found support in the start of this month, but increasing tonnage availability and a muted European demand will likely act as showstoppers
Suezmax rates from the US Gulf, Guyana, and West Africa to Europe have surged by approximately 35–45% since hitting one-year lows at the end of November. This rise contrasts starkly with intra-regional rates for shipments to Europe—originating from the Mediterranean, North Sea, and Black Sea—which have remained subdued.
The divergent trajectory between intra-regional and cross-Atlantic freight rates highlights a trend that has persisted since the trade reshuffling triggered by the Russian invasion of Ukraine. The reduction of European crude imports from Urals has compelled refineries in Europe to seek heavy crude supplies from more distant origins.
Change in Europe-bound heavy crude voyages from 2021 by origin wider shipping region (no. of voyages, LHS) vs total Suezmax voyages to Europe (no. of voyages, RHS)
From a freight market perspective, Suezmax tankers have emerged as the beneficiaries of this reshuffling. The shift towards longer voyages for crude deliveries to Europe has increased demand for larger parcels, coinciding with a growing portion of the Aframax fleet being employed in servicing Russian-origin trades. As 2024 begins, Suezmax employment on transatlantic routes to Europe has further increased, partly at the expense of Middle East Gulf (MEG)-to-Europe voyages. This shift is attributed to Red Sea attacks that have rendered longer Cape of Good Hope voyages less financially viable for traders.
The key question now is whether this trend can sustain the mini-rally in cross-Atlantic freight rates for Suezmaxes through the end of the year.
On the demand side, the US Gulf is expected to remain a strong support for tankers, as exporters in Texas and Louisiana traditionally rush to move barrels offshore before the year-end to avoid ad-valorem taxes on crude stored in onshore tanks (read more here). Meanwhile, tanker activity in Guyana remains robust, with Suezmax voyages to Europe hitting consecutive record highs in October and November, doubling year-over-year. This growth is supported by a government-imposed ban on VLCC loadings, which will remain in effect until at least the end of January due to strong swells in the region.
However, these drivers are predominantly origin-side (push-driven) rather than destination-side (pull-driven) factors. The strength of European crude demand remains uncertain, hampered by weak refining margins in the region. Preliminary data for December suggest that global crude exports to Europe are poised to decline for the second consecutive month, making a significant increase in transatlantic flows unlikely.
Tanker ballasters towards Atlantic regions (no. of vessels; SAEC = South America East Coast)
On the supply side, stagnant intra-regional European demand has prompted ballast tankers to seek more lucrative opportunities overseas. Consequently, the number of ballast tankers signaling towards key exporting hubs in the Atlantic—namely the US Gulf, West Africa, and South America’s East Coast—has risen by 5%, 3%, and 20%, respectively when compared to their 2024 averages to date. This increase in available tonnage likely means that any incremental cargo demand, particularly from the Americas East Coast, will be absorbed by the lengthening supply of vessels. As a result, Suezmax operators may find their hopes for a festive season rally unfulfilled as the year draws to a close.
