Tanker Market – Oct 10

Source: OPEC_RP101009 10/12/2010, Location: Europe

Chartering activities decreased in September in almost all regions. Total spot fixtures decreased 8.4% reflecting a slowdown in worldwide oil trade. OPEC spot fixtures decreased 8.7%, the drop in exports in most of the oil producing countries having been offset by higher domestic demand.

Middle East eastbound experienced the most important decline by 19.6% m-o-m, showing the drop in imports in Asian oil importing countries, while Middle East westbound increased by 12.8%, mostly due to the low rates in the market.

Outside of the Middle East spot fixtures remained almost at the same levels from August, with only a 2.3% decline, whilst all other areas experienced a decline of 7.9%. The low freight rates in all regions could not offset the seasonal decline.

Sailings from OPEC averaged 23.24 mb/d, down 1% from the previous month and Middle East departures decreased by 1.3%. The fall in sailings is part of the normal seasonal cut in sailings mostly attributed to the beginning of refining maintenance.

On the other hand, arrivals to North America also experienced a small decline, in September around 1.3% less crude arrived in North America compared to the previous month. The decline was the result of a total decline in US crude imports. European arrivals experienced a seasonal decline of 5.2% and the Far East also showed negative performance on its arrivals, mostly due to the autumn holidays in the region which slowed down normal activities.

The tanker market reached the lowest spot freight levels of the year, showing similar rates to those in 2009. It experienced decreases on its freight rates on all routes. Dirty tanker freight rates fell 14.3% m-o-m to 67WS, while clean market rates dropped 11.2% on the month to 141WS on average. Over-tonnage on all routes was the reason for the rates to decline.

In the dirty market, VLCC spot freight rates came down 8.7% on the month to 45WS, the lowest since November 2009. Some VLCC owners were trying to resist low rates, while others remained available, causing negative sentiment among owners.

VLCC routes from the Middle East experienced an important decline on freight rates. Middle East to East rates declined 9.6% on the month to 47WS and Middle East to the West freight rates also declined 12.2% to 36WS. The situation persisted over the month since charterers had plenty of choice and always seemed able to find someone willing to offer the already low rates prevailing in the market, a situation that reflects that the route rates generate sufficient income to cover operational expenses.

Mid-autumn holidays in the Far East spread over the second and third week of the month, resulting in less activity in the region.

VLCC rates from West Africa to East declined 5.4% m-o-m to 53WS, the decline being impacted by the Suezmax market and by cheap ballasters from the East.

Suezmax rates experienced the most important decline with 18.8% compared to August, reaching 63WS on average in September. The decline came despite an active market, as other vessels migrating to this route resulted in important declines.

The West Africa to US Gulf rate experienced a 16.9% decline on the month reaching 64WS. Nevertheless, owners experienced an average time charter equivalent to earnings (TCE) of more than $9,000 per day in this route. Northwest Europe rates to the US Gulf dropped 20.8% m-o-m to 61 WS, but showed some improvement during the last week of the month.

Aframax selected routes rates also declined by 13.7% on the month to 93WS. Overtonnage impacted the market without any signs of a fast recovery. Indonesia to East rates showed the smallest drop in the Aframax market by 7.9% on the month as they reached 93WS, while inter-Mediterranean routes were highly impacted by a 19.4% decline, averaging 87WS.

Caribbean to US East Cost and Mediterranean to Northwest Europe rates also declined by 10.4% and 16.8% respectively, to 103WS and 89WS. Weather conditions in the Atlantic were acceptable, eliminating any owners’ opportunity of achieving better rates. In the Mediterranean, strikes in a French port have made the situation even worse over the last week, stocking a considerable number of Aframaxes.

All routes to the US could decline more, but the halt of operations on the 6B line of the Enbridge pipeline due to an oil spill, avoided higher declines.

Clean market spot freight rates also showed weak performance, especially on the West of Suez routes, creating poor market conditions in the Atlantic. As a result, owners ballasted their vessels to the East, making the problem even worse. East of Suez route rates decreased 9.4% on the month to 139WS while West of Suez decreased 12.1% to 142WS.

Middle East to East rates decreased 13% to 141WS, further impacted by the mid-autumn holiday in the Far East. Singapore to East routes also dropped, but only by 5.5% to 137WS. The decrease in the clean tanker market reflects the end of the driving season as well as the beginning of the refining maintenance period.

Caribbean to US Gulf Coast and Northwest Europe to US freight rates decreased during the month by 3% and 6.1%, reflecting the end of the driving season in the US, as well as the beginning of 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 inter-Mediterranean and Mediterranean to Northwest Europe routes also experienced significant decreases of 20% and 18.8% respectively, reflecting the end of the summer season.

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