Tanker Market – Nov 10

Source: OPEC_RP101109 11/11/2010, Location: Europe

Total spot fixtures recovered 7.5% during October after the sharp decline in September with almost all routes showing positive performance. OPEC crude oil chartering jumped 7.4% m-o-m during October to 12.69 mb.

Middle East eastbound spot fixtures grew by 25.7%, mostly due to orders coming from Chinese refiners, while Middle East westbound chartering experienced 11.7% growth. Outside of the Middle East, the situation was very different. In the Atlantic coast of West Africa, spot fixtures came down during the month. Total spot fixtures outside the Middle East dropped 9.6%.

Chartering activity growth during October came after a very weak September, creating expectations of a possible recovery in the tanker market in November. The weak level of spot fixtures in September was reflected in sailings and arrivals worldwide. Sailings from OPEC and the Middle East were slightly impacted by a 0.3% and 0.4% decline respectively. Sailings in other regions were highly impacted, with Caribbean and Africa departures dropping significantly.

Arrivals to North America decreased by 11.2% to 8.53 mb reflecting the reduction in US crude imports during the month. Far East arrivals also showed some decline, mostly commanded by China, which experienced a new record high in the previous month. In contrast, European arrivals increased 8.4% to 12.37 mb, reflecting the beginning of the winter season in the region.

The tanker market experienced mixed patterns in both dirty and clean markets in October. Despite the slowdown in VLCC freight rates, the dirty market showed an exceptional recovery from a month earlier mostly commanded by Suezmax. Dirty market spot freight rates jumped 12.4% from the previous month. In contrast, the clean tanker market experienced a modest performance resulting in a small decline of 1.8% on the month in freight fees.

In the dirty market, VLCC spot freight rates came down 2.9% in October from the previous month to 44WS, the lowest since November 2009. The decrease in floating storage liberated a significant amount of tonnage that was added to the oversupply of tonnage already available in the market the previous month causing a drop in rates.

Owners were moving to different routes looking for better options, nevertheless overtonnage kept freight fees at low levels during the three first weeks of the month, while a slight recovery was experienced in the last week. Middle East eastbound rates drifted sideways for most of October, but rose sharply at the month’s end. The route rate averaged 46WS, the lowest since October 2009. An oversupply of vessels resulted in modest fees. After the first week, tanker owners decided to look for other options and moved to Atlantic routes, but the Atlantic market was saturated immediately, requiring the owners to return to their habitual routes.

Middle East westbound VLCC routes also showed negative performance, the rates being 5.6% lower than the previous month. Similar conditions were experienced on the Middle East eastbound route with some decrease recorded at the end of the month.

West Africa eastbound rates dropped 1.9% from September. Despite the significant increase showed on Suezmax routes, this route did not show much improvement during the month and the upward sentiment seen after the first week was offset by the down during the following weeks.

Suezmax market rates showed a sharp increase of 24.8% to 78WS. During the first and second week positive sentiment pushed the market up as limited tonnage availability, decent cargo interest and a bullish sentiment by owners contributed to rate increases.

West Africa to US Gulf Coast and Northwest Europe to US rates showed similar behavior. During the first two weeks, a significant increase was experienced, but then the rates curved downward partly due to a decline in cargo inquiries. US crude imports fell during October reflecting this phenomenon. West Africa to US Gulf Coast route rates increased 26.6% on the month to 81WS and Northwest Europe to US Gulf Coast rates grew by 23% to 75WS.

The Aframax market also showed some positive performance with freight rates growing 11.6% m-o-m in October to 104WS. Despite the general increase, the Aframax market showed mixed patterns during the month, with some increases on European routes and decreases in other regions.

Indonesia eastbound rates experienced a decline of 3.2% and a similar reaction was recorded on the Caribbean to US East Coast route with a 6.8% decline on rates. High tonnage available and modest cargo requirements were the core reasons for the drop. On the other hand, inter-Mediterranean freight rates grew 34.5% m-o-m in October and Mediterranean to Northwest Europe grew 25.8%. In both cases the increase experienced during the first half of the month was partly attributed to the French Mediterranean port strike during the first days of the month, as many ships were stuck in Fos Lavera obligating the owners to push for extra points for their vessels with “safe” positions. High activity in the Mediterranean also contributed to pushing up freight rates.

Clean market spot freight rates also showed mixed patterns with eastbound rates dropping and Mediterranean rates rising. On average, the clean tanker rates came down by 1.8% to 139WS – the 4.4% increase seen on rates in the West of Suez were not enough to offset the 14.4% decline in rates East of Suez.

Middle East eastbound rates fell 21.3% m-o-m in October as a result of the increase in refining activities in China, Singapore eastbound rates also experienced a decline of 7.3%. Increasing activity in Chinese and Indian refineries are impacting freight rates and the product market in general in East of Suez.

This is also reflected on the Middle East eastbound rates, which were the only route with y-o y decline. In October, freight rates on this route were 4% lower than in the same month last year. Product vessel rates from the Caribbean to US Gulf Coast increased 4.9%, helping to offset the domestic slowdown in refining activities, nevertheless freight rates from Northwest Europe to the US decreased by 2.2% m-o-m in October reflecting high tonnage availability on the route.

Inter-Mediterranean freight rates grew 7.8% m-o-m in October and Mediterranean routes to Northwest Europe increased by 7.2%. As in the dirty market, in both cases the increase experienced during the first half of the month was partly attributed to the French Mediterranean port strike during the first days of the month. High activity in the region was also seen.

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