In May, OPEC spot fixtures declined by 1 mb/d or 7.4% compared to the previous month to stand at 13.62 mb/d. The decline came on the back of lower tonnage demand and seasonal maintenance. The drop of OPEC spot fixtures in May came mainly from outside the Middle East. Global oil spot fixtures remained relatively steady in May compared to the previous month.
OPEC sailings increased by 0.27 mb/d or 1% in May, but remained close to the average of the previous months. Compared to last year, OPEC sailings experienced a drop of 0.70 mb/d or 3%. The annual decline came mainly from non Middle East sailings.
According to preliminary data, arrivals at the main importing regions showed mixed patterns. North America as well as West Asia arrivals encountered healthy gains in May compared to the previous month. US arrivals indicated an increase of 8% to stand at 9.57 mb/d and West Asia arrivals increased by 7% to stand at 4.7 mb/d in May.
However, Europe’s arrivals remained flat at 11.35 mb/d in May while Far East arrivals experienced a drop of 4% to stand at 8.0 mb/d. The increase in North America arrivals in May was supported partially by the preparation for the driving season, while the gain West Asia was supported by the prospective of increasing refinery activities. However, the decline in Far East arrivals came partially on the back of lower Japanese demand.
The tanker market for crude oil and petroleum products showed a mixed pattern in May compared to the previous month. In the dirty market, spot freight rates for VLCCs experienced a loss of 2%, Suezmax gained 2.5% and Aframax declined by 7% compared to the previous month. However, in the clean market, East of Suez spot freight rates gained 1% and West of Suez dropped 4% compared to a month earlier.
The VLCC segment of the market went through hard times in May as spot freight rates for all routes weakened. Spot freight rates for VLCCs on the Middle East to East long-haul route decreased by 2% in May compared to the previous month to average WS50.
The decrease came on the back of lower activities as market participants went on holiday in Singapore and Japan. Simultaneously, the available tonnage list expanded in May due to lower lifting from China and India. VLCC spot freight rates for the Middle East to West long-haul route averaged WS39, flat in May compared to a month earlier, due to balanced activities and available tonnage lists.
However, in West Africa, VLCC spot freight rates decreased by 4% to average WS51 in May, reflecting tonnage oversupply, lower lifting from Asian buyers, as well as spillover from Middle East tonnage oversupply.
Suezmax spot freight rates gained 2.5% in May from a month earlier, reflecting increases from both West Africa to US Gulf Coast and Northwest Europe to US routes. Spot freight rates from West Africa to the US gained 3% in May on the back of higher tonnage demand as many charterers returning from holidays looked for tonnage to cover their end-May positions.
However, the increase of Northwest Europe to US Atlantic Coast spot freight rates was supported by higher crude oil demand from the Black Sea to the US. The Aframax spot freight rates on all reported routes declined with the exception of the Mediterranean to Mediterranean route, where rates increased by 3% in May compared to the previous month.
The decline in Aframax spot freight rates came from both Indonesia to East and Caribbean to the US East Coast routes, both dropping by 14% in May compared to the previous month. The decline on the Indonesia to East route came mainly on the back of a holiday in Japan while the drop of Caribbean to US East Coast rates was due to the influence of the Mississippi flood as well as delays.
Mediterranean spot freight rates were mixed in May compared to a month earlier. Mediterranean to Mediterranean spot freight rates gained 3% in May compared to the previous month, while Mediterranean to Northwest Europe rates declined by 2%. The gain in Mediterranean to Mediterranean rates was supported by risk premiums due to geopolitical tensions while the decline in Mediterranean to Northwest Europe rates was related to lower activities of Urals crude on the back of the maintenance season for Northwest European refiners.
Clean tanker market sentiment was mixed in May compared to the previous month with East of Suez rates increasing by 1% and West of Suez rates dropping by 4%. In East of Suez, Middle East to East spot freight rates gained 4% in May over a month earlier, supported by higher naphtha and jet fuel activities. However, Singapore to East spot freight rates declined 2% in May due to a holiday in Japan that kept product activities relatively limited, as well as the shutdown of a petrochemical cracker in Taiwan and refining maintenance in Vietnam.
West of Suez, Caribbean to US Gulf Coast and Northwest Europe to US East Coast/US Gulf Coast spot freight rates declined by 12% and 8%, respectively, in May compared to a month earlier, while Mediterranean to Mediterranean and Mediterranean to Northwest Europe spot freight rates edged up by 3% in May. The decline of spot freight rates to US destinations was partially driven by higher gasoline and middle distillate stocks, as well as the closing of arbitrage opportunities. Additionally, the Mississippi river flood which affected refinery operations, further pressured the rates in May.
The increase of 3% of Mediterranean to Mediterranean spot freight rates in May was attributed to higher naphtha trade as gasoline demand on the other side of the Atlantic declined. The 3% gain of Mediterranean to Northwest Europe spot freight rates in May was due to higher jet fuel activities to fill independent storage in Rotterdam.