Tanker Market - SEP 11

Source: OPEC_RP110910 9/12/2011, Location: Europe

After the gains experienced in the last months, OPEC spot fixtures declined in August by 6%. The decline was mainly driven by eastbound fixtures as some refineries were still in maintenance. Compared to a year ago, spot fixtures declined by 9%. OPEC sailings were slightly down in August by 1% or 0.22 mb/d compared to the previous month. On an annual basis, OPEC sailings showed a decline of 4% in August. Middle East sailings decreased in August by 1.4% from the previous month, according to preliminary data. Initial estimates indicated that US and West Asia arrivals decreased by 0.5% and 4% respectively in August from the previous month, while Europe arrivals gained 0.6%. The small gain in Europe was supported by higher Black and North Seas activity. Far East arrivals remained flat in August compared to a month earlier. However, compared to last year, eastbound arrivals remained flat and westbound declined by 5%.

In August, bearish sentiment continued to dominate the crude oil tanker market, except for the Aframax sector which experienced a gain of 4% compared to the previous month. The VLCC spot freight rates lost 4% and Suezmax lost 5% during the same period. Tonnage availability, limited tonnage demand, refinery maintenance and holiday season were the key factors behind the decline in dirty spot freight rates. The gain in Aframax spot freight rates was supported by weather conditions and increased activity in the Black and North Sea after shutdown due to maintenance. Clean market rates gained 3% in August compared to a month earlier, mainly supported by healthy eastbound demand. West of Suez clean spot freight rates struggled in August as closed transatlantic arbitrage, lower gasoline demand and higher jet and gasoline stocks limited trade activities.

From Middle East to East and from Middle East to West, VLCC spot freight rates dropped 4% and 3% respectively in August compared to July. From West Africa to East, VLCC spot freight rates decreased 6% in August. Tonnage availability, holidays in Singapore, limited tonnage demand and some refinery maintenance in China and India were behind the decline in eastbound spot freight rates in August. Holidays in the UK exerted pressure on westbound spot freight rates. Compared to a year ago, on average VLCC spot freight rates declined 13% in August. From Middle East to East, from Middle East to West and from West Africa to East, spot freight rates declined by 10%, 7% and 21% respectively on an annual basis in August. On average, the decline is more than 13% compared to the beginning of 2010, as several factors continued to put downward pressures on VLCC rates. The depressed rates have been driving owners to consider laying up their vessels, as it is becoming difficult to cover operations costs.

Following the same pattern, the Suezmax sector declined in August on both reported routes. Suezmax spot freight rates on the West Africa to US Gulf route decreased 6% compared to the previous month. Limited activities and relatively ample tonnage supply, as well as a spill over effect of VLCC activity, pressured rates in August. Additionally, lower US crude oil imports, as per preliminary data, added to the bearish sentiment in August. From Northwest Europe to the US, rates dropped 3% in August from the previous month. The decline came on the back of increased tonnage availability and limited transatlantic activities. On an annual basis, Suezmax freight rates from Northwest Europe to the US declined by 23% compared to the same period last year.

This was the largest annual decline in August for all reported routes. In the Aframax sector in August, all selected route rates registered gains, except Indonesia to East, which remained flat. Caribbean to the US spot freight rates registered the highest gain, backed by heavy crude oil demand in Latin America, as well as delays and weather conditions related to Hurricane Irene. Compared to last month, Caribbean to the US spot freight rates increased 12% in August. However, compared to a year earlier, spot freight rates from the Caribbean to the US dropped by 1% in August. In the Mediterranean market, spot freight rates from the Mediterranean to Mediterranean and from the Mediterranean to Northwest Europe increased by 2% in August compared to the previous month. The gain in Mediterranean Aframax spot freight rates was supported mainly by the risk premium related to certain ports as well as the increased activities between Northwest Europe and the Mediterranean. mFurthermore, increased trading between Northwest Europe, the Black Sea, North Sea, and Mediterranean, supported by the return of refineries from maintenance, sustained Aframax spot freight rates in August.

Clean tanker market sentiment was mixed in August as East of Suez rates gained 10% and West of Suez edged down by 0.3% compared to last month. Closed arbitrage and lower naphtha trades weighed on westbound spot freight rates while increasing trade with Asia boosted eastbound spot freight rates. East of Suez, clean tanker spot freight rates rebounded in August after the decline witnessed last month. Clean spot freight rates increased on all reported routes with Middle East to East and Singapore to East registering healthy gains of 12% and 8% respectively. The gain in Middle East to East clean spot freight rates was supported by healthy naphtha demand from the Middle East, rising Indian product exports and limited tonnage availability. Singapore to East was backed by increased activity due to fresh demand from Vietnam and Singapore. However, compared to a year ago, Middle East to East clean spot freight rates declined by 14% and Singapore to East gained 9% in August.

West of Suez, clean tanker spot freight rates declined on all reported routes, except Caribbean to the US Gulf, which closed up by 3% in August compared to the previous month. From Northwest Europe to the US, Mediterranean to Mediterranean and Mediterranean to Northwest Europe, clean spot freight rates closed down by 2%, 1.4% and 1.3% respectively in August, compared to the previous month. Closed arbitrage, lower US gasoline demand, and healthy stocks of gasoline and jet fuel in the US drovem the decline in clean spot freight rates, while the modest gain in the Caribbean to the US rates was supported by weather conditions related to Hurricane Irene and delays. Compared to last year, spot freight rates from Northwest Europe to the US, Mediterranean to Mediterranean and Mediterranean to Northwest Europe declined by 1%, 14% and 13%, respectively, in August.


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