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Tanker Market - March 2017

Source: OPEC_RP170309 3/14/2017, Location: Europe

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Following the gains in the tanker market registered in the previous month, average dirty tanker spot freight rates declined by 21% in February reversing all profits made one month before. Lower rates were seen in all reported dirty classes in February, which was partially attributed to holidays in the East, as well as thin market activity in general and an increase in vessels supply, including new deliveries. Dirty tanker average freight rates showed a drop from the previous month as VLCC, Suezmax and Aframax rates went down by 20%, 22% and 21%, respectively. Clean tanker spot freight rates were no exception as they fell under the influence of the general downward trend, which overtook the tanker market in February. A lack of activity was seen dominating different classes in the clean tanker market, thus on average clean tanker spot freight rates were down by 16% from the month before.

Spot fixtures
According to preliminary data, global fixtures dropped by 1.5% in February compared to the previous month. OPEC spot fixtures were down by 3.5%, or 0.41 mb/d, to average 11.46 mb/d. Fixtures on the Middle East-to-East route averaged 5.49 mb/d in February, down by 0.06 mb/d from one month ago, while those on the Middle East-to-West route averaged 2.57 mb/d. Outside of the Middle East, fixtures averaged 3.39 mb/d, dropping by 0.21 mb/d m-o-m, compared with the same period a year before it remained flat.

Sailings and arrivals
Preliminary data shows OPEC sailings were 1.4% lower in February, averaging 23.95 mb/d. This was 0.08 mb/d below the same month a year ago. Middle East sailings also went down by 1.4% from the previous month and by 1.6% from a year ago.

February arrivals were mixed, registering declines of 1.8% and 4.7% from one month ago in North American and West Asian ports, respectively, while arrivals to Europe and Far East increased by 0.4% and 2.1%, respectively, to average 12.28 mb/d and 8.62 mb/d.

Following the increase in January, VLCC freight rates saw a softer sentiment beginning of February as a new wave of vessels delivery into the market led to a sharp fall in rates. This occurred despite the cargo loading requirements, mainly in the Middle East, which offset the drop in rates to some extent. In the West African oil market, steady activity (mainly for March loading) supported freight rates and prevented further drops. Nevertheless, in general the VLCC market was lacking activities in February due to holidays in different regions and a flurry of new deliveries, which added to the tonnage build up.

Freight rates registered for tankers operating on the Middle East-to-East route went down by 15% from previous month to stand at WS71 points. Middle East-to-West routes declined by 29% from the previous month to stand at WS37 points, influenced by the downward pressure in the region. Similarly, West Africa-toEast routes dropped by 15% from a month ago to average WS71 points. On all routes, the VLCC freight rates were negatively influenced by fewer cargo loading requirements and a prolonged tonnage list. Nevertheless, VLCC freight rates in February remain 18% above those of the same month a year before.

Suezmax average spot freight rates experienced a higher drop than those of VLCCs in February. Rates for tankers operating on the West Africa-to-US route decreased by 23% to average WS74 points. Rates on the Northwest Europe (NWE)-to-US route fell by 21% in February from the previous month to average WS65 points. The drop in freight rates came as a result of weak tonnage demand in West Africa and light inquiries in the Black Sea and the Mediterranean. The relative higher activities, as well as some replacements and fuel arbitrage tonnage requirements, were not enough to support Suezmax rates in February as they dropped from the previous month and the previous year as well. Reduced weather delays at the Turkish Straits were another factor which contributed to the drop in rates as the tonnage list prolonged further.

Generally, Suezmax spot freight rates experienced the highest drop among tankers in the dirty tanker market. Average spot freight rates for Suezmax declined by 22% in February from the previous month to average WS69 points.

The Aframax sector saw a similar decline in freight rates as experienced with other dirty vessels. Freight rates on all reported routes showed a drop from the previous month, despite fluctuations during the month. They edged down on average from the previous month showing a drop of 22%. Rates edged down for ice class vessels allowing Aframax rates in general to fall.

In the North Sea, rates for long haul voyage requirements weakened. In the Mediterranean, freight rates for Aframax operating on both Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes showed a decline of 28% and 32%, respectively, to stand at WS103 and WS94 points. Average monthly freight rates dropped despite a fair level of activities in the Mediterranean and the Black Sea.

In the Caribbean, Aframax freight rates were down from the previous month as seen on other routes. Lower rates in February came on the back of limited activities in the Caribbean as cargo requirements were thin. Aframax freight rates in the US Gulf Coast dropped on average despite tightening vessels supply as a result of delays in that area. Aframax rates on Caribbean-to-US routes reported a loss of 16% to stand at WS131 points. Rates in the East were no exception as Aframax rates on Indonesia-to-East routes went down by 9% to average WS105 points in February.

Clean tanker freight rates
As seen in the dirty segment of the market, clean spot tanker freight rates weakened on all reported routes. Similarly, freight rates for clean tankers in different classes showed a decline. Softer rates were mainly supported by growing tonnage availability and slow activity in the market, which could be partially attributed to the holidays. Average clean tanker rates declined by 16% as both East and West of Suez fixtures dropped by 9% and 20%, respectively.

In the East of Suez, average clean tanker freight rates dropped by 9% from the previous month as holidays in the East created a vessels pile up, dragging freight rates down to the medium-range. Therefore, the rate for tankers trading on the Singapore-to-East route dropped by 10%, and the rate for the Middle East-to-East route showed a decline of 7% as both stood at WS157 points and WS116 points, respectively.

In the West of Suez, a continuous downward trend dominated freight rates. Average spot freight rates experienced a drop by 21% to average WS135 points from the previous month, as freight rates registered for tankers trading on the NWE-to-US route showed the highest decline in February.

In the Mediterranean, another drop in rates was detected in February as average freight rates for clean tankers trading on both Mediterranean-to-Mediterranean and Mediterranean-to-NWE declined by 20% to stand at WS147 and WS157 points, respectively.

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