Tanker Market - Sept 12

Source: OPEC_RP120909 9/11/2012, Location: Europe

Global spot fixtures declined in August by 3.42 mb/d or 20.1% to average 17.01 mb/d. OPEC fixtures also saw a drop by 1.04 mb/d to stand at 10.54 mb/d. Sailings from OPEC were almost steady to average 24.01 mb/d, reflecting a minor increase of 0.1% from the previous month and 6.2% from levels seen last year. Middle East sailings saw a similar increase of 0.1% to average 17.66 mb/d, while y-o-y the increase amounts to 2%. According to preliminary data, arrivals at North America, Europe and West Asia increased by 5.7%, 0.7% and 9.5% from July, while the Far East was the only route, which saw a decrease of 3% from the previous month’s arrivals. The spot tanker market was under pressure in August and spot freight rates continued declining from levels seen in the previous month. The same factors that had been negatively affecting the tanker market continued to pressure rates. The market continued to be oversupplied with insufficient demand to secure employment for the available vessels. The bearish sentiment was overwhelming on all classes. Current levels are considered unacceptable in many cases for owners, whose earnings have reached rockbottom levels, amid a recent rise in bunker prices which negatively influenced daily returns and voyage profitability. Some owners showed resistance to the current rate, while others went to the tactic of hiding their available vessels in a trial to reduce the positions list length and thus enhance persisting rates. Overall the tanker market was very quiet in August, with several holidays in the month, and rates were often assessed based on last done deals due to the lack of fresh activity.

In August, VLCC spot freights rate dropped further from a month earlier, when rates were assumed to have bottomed out and no further drop could be accepted. Tonnage oversupply, which created a lengthy positions list, combined with a decreasing level of activity, remains the main factor behind VLCC freight rate decline. Rates droppeddespite typhoons Saola, Damry, Tembin and Bolven, which had only a minor effect of a few days of delays and could not offset the long positions list, considering the considerable number of vessels available. VLCC spot freight rates declined on all reported routes, further losing world scale points from levels seen last month. The Middle East to East route ended the month flat, while the Middle East to West route dropped by 3.8% from July to stand at WS36 and WS25 points, respectively. In comparison to the same period a year earlier, both routes declined by 23% and 34%, respectively. Freight rates for the West Africa to East route declined by 12.7% to stand WS55 points from July, dropping by 18% from a year earlier. Furthermore, the lump sum rate on the Northwest Europe to Asia route was assessed below US$3 mn in August, the lowest lump sum rate seen on this route since October 2011.

Suezmax reached the lowest levels seen this year in August. The Suezmax average monthly spot freight rate dropped by 7.6% to stand at WS55 points as the West Africa to US Gulf Coast (USCG) route decreased by 12.7% to stand at WS55 points, while Northwest Europe to US East Coast (USEC)-USGC decreased by 1.8% from July. The depressed Suezmax rates have been continuing for a while as a result of lower crude liftings from West Africa. The eastern Suezmax market saw improved sentiment in August as the availability of ships for some dates was tighter, which helped to push rates up, taking into consideration that the age restriction for vessels loading in the Middle East region made the list tighter. However, that did not give any real boost to the freight rate. The Suezmax market in the Mediterranean was quiet in general, due to the scarcity of cargoes in that area, which adversely affected tonnage demand. In East of Suez, Suezmax is currently facing competition from VLCCs which have been suffering from long unemployment that has resulted in VLCCs moving into the Suezmax market on a part-cargo basis, where draft restrictions allowed it.

As with all dirty tanker classes, the Aframax sector declined on all reported routes in August with one exception, the Indonesia to East route, which saw a gain of 4.7% to average WS90 points. However, this still shows a drop of 8% from the same month last year. The Caribbean to US East Coast route saw a marginal drop of 1.1% from July to average WS93, while Mediterranean to Mediterranean and Mediterranean to Northwest Europe routes both saw a larger drop of 13% and 15%, respectively. Bearish sentiment dominated the Aframax market, combined with low activity level in general. The Baltics witnesses less Aframax movement, generally, due to facility maintenance in the region, while the effect of Hurricane Isaac in the Caribbean was limited to vessel delays and replacements, which eventually led to a modest increase in rates. Towards the end of the month, rates remained stable, despite an increased level of activity and a more balanced position’s list. Current Aframax returns were found not to be covering owner’s operational costs.

In August, the clean tanker market saw a mixed pattern, as the average spot freight rates for Middle East to East and Singapore to East dropped by 3.2% and 2.4% respectively, to average WS 121 points each, while the Caribbean to USGC saw a greater drop of 6%. However, the decline amounts to 36% in comparison to last year’s level. In contrast, both Northwest Europe to US and Mediterranean to Mediterranean routes gained 21.3% and 3%. Overall, the clean tanker market was stable with a fair amount of activity in the West of Suez, yet the abundant tonnage supply prevented rates from moving significantly higher. Towards the end of the month, clean spot freight rates saw an upward trend and a rush of activity on the US Gulf Coast to Northwest Europe, as well as the US Gulf Coast to Caribbean route, following the Amuay refinery explosion, which, despite initial uncertainty, did not have a strong impact on the freight rates. It is worth highlighting that in August average spot freight rates on all reported routes saw a decline in all sectors ranging from 1% to 36% compared to a year earlier.

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