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Tanker Market - September 2017

Source: OPEC_RP170909 9/12/2017, Location: Europe

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Dirty tanker market sentiment weakened in August, as average spot freight rates declined on most reported routes. On average, dirty tanker freight rates were down by 4% from the month before. Earnings for dirty tankers reached the lowest level seen since the beginning of the year. Among other factors, the drop in dirty spot freight rates was influenced by high vessel availability, as new deliveries were reportedly added to the fleet, putting pressure on the already oversupplied tonnage market.

Average clean tanker spot freight rates also developed negatively in August despite enhanced rates registered in East of Suez. In the West of Suez, Medium-range (MR) tanker freight rates almost doubled in the US following Hurricane Harvey. However, the gains were shortly lived as the market found its balance. Average MR tanker freight rates declined on all reported routes in the West with no exception. Generally, the clean tanker market was quiet in August, showing no significant demand.

Spot fixtures
Global fixtures rose by 1.1% in August, compared with the previous month. OPEC spot fixtures declined by 0.37 mb/d, or 3%, averaging 11.86 mb/d, according to preliminary data. The drop in fixtures was registered mainly in the East. Fixtures on Middle East-to-East destinations were lower, as were fixtures outside of the Middle East, which averaged 3.87 mb/d in August, down by 0.19 mb/d from one month earlier. Compared with the same period a year earlier, all fixtures were higher in August.

Sailings and arrivals
Preliminary data showed that OPEC sailings declined by 0.5% in August, averaging 24 mb/d, though remaining 0.32 mb/d, or 1.4%, higher than the same month a year before.

Arrivals in Europe were up from the previous month, while in the Far East, West Asia and North America, arrivals declined by 0.01 mb/d, 0.04 mb/d and 0.43 mb/d, respectively, to average 8.82 mb/d, 4.64 mb/d and 9.77 mb/d.

VLCC
Following the typical trend in the summer months, VLCCs lacked tonnage demand in general, which prolonged the tonnage list and thus kept spot freight rates under constant pressure as they had been in previous months. VLCC spot fright rates were softer in August on several routes as competition between ship owners put further pressure on rates and prevented them from achieving any gains, even during days of relatively enhanced activity.

In August, VLCC daily earnings dropped to the lowest level this year so far and low freight rates discouraged ship owners from getting involved in longer-haul voyages. Thus, VLCC freight rates on key trading routes Middle East-to-East and Middle East-to-West fell, with spot freight rates decreasing by 18% and 6%, respectively, from the previous month to stand at WS42 and WS24 points. Similarly, spot freight rates on the West Africa-to-East route declined by 10% to average WS49 points.

Suezmax
Suezmax was the only class in the dirty tanker segment which showed a rate increase from the previous month as a result of higher volumes of fixtures to eastern destinations, which led to tighter ship availability. Suezmax freight rates saw minor gains on average in August, despite new deliveries adding to the already oversupplied tonnage market. Freight rates for tankers operating on the West Africa-to-USGC route remained unchanged from the previous month to average WS61 points. Similarly in the West, freight rates on the Northwest Europe (NWE)-to-USGC route stood at WS55 points.

Aframax
Aframax spot freight rates declined across all reported routes in August, suffering from the same general negative trend dominating the tanker market during the summer months when markets in several regions remained depressed despite weather delays and some replacements and the market remained under the influence of slow activity and a prolonged tonnage list. As a result, freight rates for tankers trading on both the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes declined by 7% each to stand at WS78 and WS72 points in August, respectively, compared with the previous month.

The Aframax market in the Caribbean was generally quiet and lacking cargoes, as was seen with other routes. Average Aframax freight rates dropped in August, despite an increase in rates which were driven by operation disruption following the Harvey Hurricane in the US. Average monthly freight rates for tankers operating on the Caribbean-to-US East Coast (USEC) route rose by 10% over the previous month to average WS100 points. In contrast, average freight rates for tankers trading on the Indonesia-to-East route dropped by 3% to average WS84 points.

Clean tanker freight rates
Clean tanker market sentiment mostly came under pressure in August despite a strengthening trend in the East of Suez, nevertheless weak rates in the West of Suez drove average clean tanker rates down by 1%.

The clean tanker market was quiet and sentiment stayed weak. Rates often remained flat, despite firmer sentiment in the East of Suez, which was initially detected for LR ships for which freight rates edged up on several trading routes before MR vessels followed suit.

MR tanker rates registered on the Middle East-to-East route showed an increase of 12% from a month ago to average WS127 points.

Rates for tankers operating on the Singapore-to-East route increased by 5% from July to WS155 points.

In the West of Suez, rates have been experiencing a downward trend in different classes. Spot freight rates were mostly flat on the back of ample tonnage supply. Freight rates on the NWE-to-USEC remained marginally unchanged. Temporary MR freight rates more than doubled as affected by the hurricane in the US, however the escalating trend faded quickly as rates went down showing no effect on the freight rates monthly average. Sport freight rates registered for tankers trading on the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes declined by 11% each, to stand at WS118 points and WS127 points respectively.

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