Is an Atlantic Basin crude glut on the cards?

An Atlantic Basin crude glut may be on the horizon, according to recent freight rate data. The price advantage that Atlantic Basin crude once had over Middle Eastern supply has narrowed to record lows, as freight costs from Atlantic origins to Asian refiners have surged compared to those from Fujairah. This freight disadvantage makes it difficult for Atlantic grades to compete against Middle Eastern supply in Asia.

US crude, specifically WTI fob USGC, has strengthened against other Atlantic grades, although the US Gulf premium to Asia remains one of the most expensive. Despite this, freight rates have not been a major factor in WTI's strong performance. The shift in cargo routing has also contributed to the weak netback for Asian refiners, keeping more Atlantic crude in the region and forcing suppliers to compete for European demand.

Middle East barrels continue to have the edge in Asia, with the return of pre-war Middle East seaborne crude/condensate exports and a seasonal high in exports reinforcing the region's advantage. The VLCC shortage is concentrated in the Atlantic, with ballast VLCCs heading to the Atlantic falling to a six-year low and reaching a record in the week of 12 October.

Global seaborne crude/condensate liftings have returned to near 2025 peaks, suggesting that a sustained return of tonnage could ease pressure on differentials and improve Atlantic crude's competitiveness. However, sanctions relief and pipeline alternatives may limit the likelihood of another supply shock regaining Asian market share.