Chartering activity grew during August in all regions; total spot fixtures increased 9.4% m-o-m from July. Most of the increase was attributed to low freight rates during the month as well as high tonnage availability, which pushed charterers to cover open positions before market conditions changed.
OPEC spot fixtures increased 9.8% m-o-m in August. Middle East eastbound spot fixtures increased 4.1% while Middle East westbound spot fixtures increased 26.5% reflecting the modest position on long-haul eastern routes. Outside the Middle East also showed a healthy increase by 12.8%. The increase was partially impacted by the clean tanker market, which becomes active during refinery maintenance season. During this time, domestic refineries cut down production and products need to be transported longer distances.
Sailings from OPEC and Middle East experienced a decline of 1% and 1.1% m-o-m respectively in August. The experienced decline is part of the normal seasonal cut in sailings mostly attributed to the beginning of refining maintenance. A drop in eastern crude demand also impacted sailing activity. Despite the monthly decline, sailing levels continued at healthy levels compared with last year.
On the arrivals side, North America arrivals showed a gain of 3.5%, which was reflected in the increase of crude oil storage. Europe fell 3.2% reflecting the cut in refining activity. West Asia also showed a small decline of 2.6%.
The crude oil tanker market continued with the weak trend seen in July, experiencing declining rates during August on all routes. VLCC spot freight rates fell 8.6%, Suezmax rates decreased 4.9% and Aframax freight rates fell by 8.1% in August over the previous month. The tanker market was impacted by a significant increase in tonnage due to the release of vessels that were previously tied up for floating storage.
The VLCC market continued to deteriorate during August with Middle East/East and Middle East/West routes remaining at around $1.30/b and $1.65/b respectively at the end of the month. Freight rates were below operational costs for West routes while hovering around operational expenses for the East routes. The decline was the result of high available tonnage, slow activity and the beginning of refining maintenance season. Vessel owners could not stop the monthly drop despite their efforts to stabilize the fundamentals of the market.
VLCC rates from West Africa to East also declined by 6.7% due to the increase of available tonnage in the route.
Suezmax rates in West Africa/US Gulf Coast continued to drop due to lack of activity and a buildup of available tonnage. Rates on the route averaged $1.86/b or 4.9% lower than July. The low price also impacted VLCC rates in the Atlantic. Similarly, Suezmax rates for North West Europe/US East Coast and US Gulf Coast route declined 4.9%.
Aframax market rates in the Caribbean/US East Coast route fell 18.4%. Although the volume of new business in the Caribbean was healthy, a balanced tonnage list made it difficult for either side to influence rate levels. As Hurricane Danielle had a negligible impact on the market, it is likely that the decline is the consequence of the drop of rates in other Atlantic markets, with little prospects in the months ahead.
Aframax Indonesia Eastbound route was also impacted by global market trends falling 9% from July. Mediterranean/Mediterranean and Mediterranean/Northwest Europe routes remained at similar levels as in the previous month. Aframaxes in the Mediterranean region showed their volatility once again with a false expectation of recovery during the first half of the month, perhaps occasioned by thinner list positions due to recent norms.
The clean market spot freights decreased 15.1% m-o-m in August, but experienced mixed patterns. East of Suez spot rates increased 23.3% while West of Suez route rates declined 26%.
Middle East eastbound route rates increased 28.6% and Singapore eastbound rates grew 17.9% m-o-m during August, reflecting healthy demand in Japan and Far East as well as the beginning of refinery maintenance in some eastern refineries.
The Caribbean/US Gulf Coast and Northwest Europe/US East Coast and US Gulf Coast freight rates decreased throughout the month, reflecting the end of the driving season in the US as well as the beginning of the refining maintenance season in Europe. Though intermittent arbitrage opportunities have given some small spikes in the Atlantic market during the month; nevertheless, the trend has been weak following modest demand and low refining margins.
The Mediterranean/Mediterranean and Mediterranean/Northwest Europe also experienced significant decreases of 28.9% and 27.7% respectively, reflecting the end of the summer driving season.