Tanker Market - DEC 11

Source: OPEC_RP111209 12/13/2011, Location: Europe

In November, OPEC spot fixtures increased by 9% from the previous month to average 11.86 mb/d, according to preliminary data. The experienced increase is mainly attributed to higher spot fixtures from the Middle East to East destinations, which increased by 0.95 mb/d or 15% in November to average 7.02 mb/d. Winter season demand, as well as higher Chinese requirements, supported the fixture increase in November. Spot fixtures from outside the Middle East registered a small gain of 60 tb/d or 2% in November compared to the previous month.

OPEC sailings increased by 0.65 mb/d or 3% in November to stand at 23.13 mb/d, supported by an increase of Middle East sailings. In November, Middle East sailings gained 0.49 mb/d or 4% from the previous month to stand at 12.85 mb/d. During the first eleven months of 2011, OPEC sailings declined by around 0.3 mb/d compared to the same period of 2010. Crude oil arrivals increased in November in North America, the Far East and West Asia by 0.1%, 0.5% and 3%, respectively, compared to the previous month, while Europe arrivals declined by 30 tb/d or 0.3%.

In November, dirty tanker market sentiment was mixed. VLCC spot freight rates continued the positive momentum and average rates stood 23% higher than in the previous month. However, Suezmax and Aframax average spot freight rates declined by 11% and 17%, respectively, compared to the previous month, despite the gains registered a month earlier. For the VLCC sector, spot freight rates for tankers operating the Middle East to the East route registered the largest increase among all reported routes. Middle East to East VLCC spot freight rates increased by 13WS or 28% in November compared to the previous month.

The increase was supported by higher Chinese requirements to cover stock-draws in October, driven by higher diesel demand. VLCC spot freight rates for tankers operating the West Africa to the East route were supported by higher Chinese requirements, as well as healthy lifting by Indian buyers. Accordingly, spot freight rates increased by 21% in November to stand at 58WS.

Winter seasonal demand from the West improved tonnage demand and supported VLCC spot freight on the long-haul route from the Middle East to the West in November to average 41WS, an increase of 17% from the previous month. Despite the November increase of VLCC spot freight rates, during the first eleven months of 2011, VLCC average spot freight rates dropped by 28% compared to the same period of 2010. The extremely lower freight rates so far this year drove some companies to file for bankruptcy.

Suezmax market sentiment was bearish in November. Spot freight rates for Suezmax operating from both West Africa to the US and Northwest Europe to the US declined by 15% and 8%, respectively, in November compared to the previous month. Lower West African crude requirements from the US, on the back of weak gasoline demand, as well as increased US oil supply, along with Suezmax tonnage oversupply, were the main factors behind the drop of Suezmax spot freight rates in November. So far in 2011, Suezmax average spot freight rates have indicated a decline of 22% compared to the same period in 2010.

In the Aframax sector, limited cargoes from the Black Sea, partially due to field maintenance in the Caspian, strongly impacted Aframax spot freight rates. Aframax tankers operating the Mediterranean to the Mediterranean and Mediterranean to Northwest Europe routes encountered a sharp decline in spot freight rates in November of 36% and 35%, respectively, compared to the previous month. On a y-o-y basis, rates indicated a decline of 9%. Reduced delays at the Turkish straights contributed to the easing of the Mediterranean freight market.

However, on the Indonesia to the East and Caribbean to the US routes, Aframax spot freight rates gained 7% and 8%, respectively, in November compared to the previous month. The increase seen in the Aframax spot freight rates on the Caribbean to the US route was supported by the tight tonnage position and owners’ pressure to achieve better rates.

Clean average spot freight rates gained 1.6% in November compared to the previous month, supported by the continued upward momentum of the West of Suez market as well as the rebound of East of Suez rates. Clean west spot freight rates gained 1.5% in November compared to the previous month and East spot freight rates rebounded by 1.9%. Clean spot freight rates for tankers operating the Middle East to the East route increased by 1.7% and rates for the Singapore to the East route increased by 2% in November compared to the previous month. Higher naphtha and petroleum products trade supported clean spot freight rates in the East of Suez.

The increase in West clean spot freight rates in November was supported by Caribbean to the US and Mediterranean to Northwest Europe as a result of tight tonnage positions and strong US diesel exports to the Caribbean and Northwest Europe markets. Compared to the previous month, clean spot freight rates on the Caribbean to the US and Mediterranean to Northwest Europe routes increased by 6% and 1%, respectively, in November.

Clean spot freight rates on the Northwest Europe to the US and Mediterranean to the Mediterranean routes were very weak in November and weighed negatively on the average of West clean spot freight rates. Northwest Europe to the US route clean spot freight rates dropped by 1% and Mediterranean to the Mediterranean rates declined by 1.3%, mainly due to limited tonnage demand and access of tonnage supply. On an annual basis, average clean spot freight rates remained relatively steady.


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