OPEC spot fixtures decreased by 1.63 mb/d or 12% in January from the previous month to average 13.05 mb/d. The decrease in fixtures was within the typical range for the holiday season as well as the upcoming maintenance season. Additionally, the higher level of fixtures in December partially offset the decline in January. Middle East to Eastbound fixtures decreased by 0.6 mb/d or 10% in January compared to the previous month, whereas Westbound fixtures declined by 0.4 mb/d. Compared to a year earlier, Middle East fixtures to the East increased by 44% and to the West increased by 15% in January.
Preliminary data shows that January OPEC sailings remained steady compared to the previous month, with a minor increase of 20tb/d or 0.1% to average 23.61 mb/d. OPEC sailings in January showed an increase of 3% compared to the same month last year. Arrivals in almost all selected discharging ports increased in January due mainly to the previous month’s liftings. North America arrivals increased by 60 tb/d, Europe arrivals increased by 90 tb/d or 0.7%, and the Far East by 270tb/d or 3.3%.
The crude oil tanker market experienced strong bearish sentiment in January compared to the previous month. Dirty tanker spot freight rates declined in January throughout all market segments as a result of the availability of excess tonnage. New deliveries supported tonnage availability as well as lower tonnage demand and improved weather conditions. Moreover, changes to the new Worldscale flat rate further pressured the rates in January.
On average and in nominal terms, VLCC spot freight rates decreased by 21%, Suezmax dropped 41% and Aframax declined by 32% in January compared to the previous month. In the VLCC segment, spot freight rates for VLCC operating the long-haul route Middle East to East declined by 22% in January compared to the previous month. The drop was driven generally by lower tonnage demand in Asia, and China in particular, as many Chinese charterers went on holiday.
Refinery maintenance schedules in Taiwan and other locations further pressured the decline of spot freight rates. From the Middle East to West destinations, VLCC spot freight rates for long haul voyages registered a decline of 20% in January from the previous month. Similarly, tanker oversupply was one of the main factors weighing on spot freight rates on the Middle East/West route. Additionally, weather conditions, lower tonnage demand as well as Worldscale flat rate adjustments contributed to the decline of spot freight rates.
Spot freight rates for VLCC operating on the West Africa to East route dropped by 20% in January compared to the previous month. The decline was driven mainly by lower tonnage demand from Asia and tonnage oversupply. Taking into consideration the new flat rate 2011, the VLCC sector slipped 5% on average in January. Looking at the selected routes, Middle East/East, Middle East/West and West Africa/East routes for VLCC spot freight rates declined 7%, 3% and 3% respectively.
Suezmax spot freight rates witnessed the biggest drop compared to all other segments. Spot freight rates for Suezmax operating on West Africa to the US Gulf declined 43% in January compared to the previous month, the largest decline among all reported routes. On the Northwest Europe to US Gulf Coast route, Suezmax spot freight rates dropped 38% in January compared to the previous month.
The decline of Suezmax spot freight rates was mainly due to the impact of tonnage oversupply resulting from lower transatlantic activity due to the upcoming maintenance season on the Gulf Coast. The improved weather conditions reduced delays in Northern Hampshire, which further supported availability and pressured spot freight rates. The Aframax sector also came under pressure in January. Spot freight rates for Aframax operating on the Indonesia to East route declined by 22% in January compared to the previous month.
On the Caribbean to the US East Coast, rates decreased by 25% and on the Mediterranean to Mediterranean as well as Mediterranean to Northwest Europe routes, spot freight rates dropped 44% and 35% respectively. The drop in Mediterranean to Mediterranean and Mediterranean to Northwest Europe Aframax spot freight rates was mainly due to the impact of lower activity in the North Sea and Baltic routes on Russian crude activity. Additionally, the shortened delays at the Turkish straits as weather conditions improved strongly supported vessel availability in January. The drop in Aframax spot freight rates on the Caribbean to US East Coast route was backed by lower tonnage demand from the US due to the upcoming maintenance season on the US Gulf Coast.
In the clean markets, spot freight rates weakened on all routes in January after a rebound on many routes in the previous month. East of Suez decreased by 13% and west of Suez dropped 24%. The biggest drop on clean tanker spot freight rates was seen on the Northwest Europe to US East Coast– US Gulf Coast route, which registered a decline of 26% compared to the previous month.
The decline came on the back of closed arbitrage of gasoil as well as shortened delays due to better weather conditions. Additionally, tonnage oversupply further pressured rates. Higher gasoline stocks in the US supported the closure of arbitrage.
The second biggest decline of clean spot freight rates was registered in the Mediterranean. Clean spot freight rates for tankers operating on the Mediterranean to Mediterranean and Mediterranean to Northwest Europe routes decreased by 25% and 24% in January compared to the previous month, mainly on tonnage oversupply and fewer delays at the Turkish straits.
Clean spot freight rates for voyages on the Middle East to East and Singapore to East routes declined by 12% and 13% respectively. Tonnage availability was among the main reasons for the decline as naphtha arbitrage closed and Chinese charterers went on holiday. The use of the new Worldscale flat rate was a considerable factor behind the drop of clean spot freight rates, as the higher price of bunkering in 2010 supported the increase of the flat rate.