Tanker Market - Nov 12

Source: OPEC_RP121109 11/10/2012, Location: Europe

In October, global spot fixtures increased from the previous month by 3.5% or 0.58 mb/d to average 16.09 mb/d. OPEC fixtures rose as well, by 2.2% or 0.27 mb/d to average 12.22 mb/d. Annually, global and OPEC fixtures went up by 10.2% and 10.5% respectively. OPEC sailings saw a slight decline of 0.15 mb/d from the previous month to average 23.71 mb/d, that is, 0.6% lower than in September and yet 6.1% higher than last year’s level. Middle East sailings witnessed a similar decline of 0.17 tb/d to average 17.31 mb in October, which was 0.17 mb/d or 1% lower than the previous month and 0.7% below the same month a year earlier. Crude oil arrivals in North America dropped by 0.54 mb/d or 5.9% from the previous month to 8.6 mb/d; yet they increased by 7.3% from a year earlier. European arrivals rose in October by 0.25 mb/d or 2% to 12.4 mb/d, while Far East and West Asia arrivals went up by 0.10 mb/d and 0.06 mb/d from the previous month to average 8.53 mb/d and 4.56 mb/d respectively. In an annual comparison, arrivals in Europe, the Far East and West Asia dropped from last year’s level by 1.7%, 0.7% and 0.4% respectively.

In the tanker market, October is best described as uneventful, with no significant incidents to report. The month was characterized by its slow pace and low activity in several classes in both the clean and dirty segments. Generally, dirty tanker freight rates were mixed in October, while VLCC and Aframax rates declined. Suezmax ended the month with a marginal increase amid higher demand on tonnage loading in West Africa. Bunker prices remained high, affecting ship owners’ margins and voyage profitability. Yet in October, no further increases in bunker prices were detected, as prices remained below the peak levels seen early in the year. The market remained over-supplied with tonnage against limited demand.

The VLCC market started October in a quiet way and with a steady amount of limited activity in general, which led to tonnage-building. Following the completion of October’s third decade requirements, the market saw a decline in activity, due partly to holidays in the Far East. Yet an influx of inquiries was seen with the start of November stem fixtures. However, owners were optimistic that rates would improve with the winter’s seasonal demand. Nevertheless, despite the uptrend in activity, there was only a minimal impact on rates limited to a few world-scale points. As a result, owners’ earnings were found in the negative zone in many cases. Yet, considering the lengthy tonnage list and the limited amount of inquiries, owners tried to maintain the levels and prevent rates from dropping further. At the same time, charterers unsuccessfully attempted to obtain lower levels that were not feasible, bearing in mind the fact that rates had already bottomed out on some routes as owners’ returns reached zero.

Charterers were not in a hurry to fix their requirements, since vessels could be secured easily at any stage of the month, with ample vessel availability. Following the small gains achieved with VLCCs the previous month, spot freight rates dropped by 5.6% in October to average WS34 points, which was 22% lower than the same month a year earlier. The largest declines were registered on Middle East routes, as Middle East-to- East and Middle East-to-West fell by 7.7% and 10.7% in October, while the West Africato- East route ended the month flat, unchanged from September.

The first week of October brought no improvement to the Suezmax class, as freight rates maintained the levels seen earlier, with few inquiries. Yet the middle of the month saw more activity for Suezmax on several routes and mainly on the Middle East-to- East, while the Mediterranean-to-Black Sea and Middle East-to-West routes both saw a fair amount of activity, coupled with a slight improvement in rates. In October, the demand for Suezmax vessels loading from West Africa increased, and yet rates did not benefit significantly from the greater demand. The only fixture that was reported at a higher rate on the West African Suezmax market came about as a result of being a prompt replacement for a delayed ship, under the exceptional circumstance of no alternative vessel being available. On average, Suezmax spot freight rates increased by 1.9% from last month, due mainly to higher rates seen on the West Africa-to-US Gulf route, which increased by 5.5% from the previous month and yet decreased by 35% from the same month a year ago. In October, Suezmax faced less competition from VLCCs, unlike the trend that persisted strongly this summer.

Aframax saw a slow start in October, along with lower demand caused partly by refinery maintenance in Primorsk, which had a negative impact on rates and activity in the North Sea. North Sea activity levels increased afterwards, and yet no improvement was registered as freight rates remained flat. The quiet tone was also noticed on the Mediterranean-to-Black Sea route, where rates remained flat as a result of abundant vessel supply. The ample tonnage availability also affected vessel trading on the Mediterranean routes, as freight rates saw no improvement in general, despite a considerable volume of activity during October. In the third week of October, Aframax vessels trading in Mediterranean faced some delays, as a result of congestion in Trieste and delays in the Turkish straits. However, even among such events, rates gained only a few WS points, as the positions list remained plentiful and alternative tonnages could be secured easily. Rates for the Caribbean were stronger in October towards the end of the month, when the vessel positions list thinned during greater activity. On average, Aframax spot freight rates ended the month declining by a slight 0.3% from September. The main contributor to this decline was the drop registered on the Indonesia-to-East route, which decreased by 5% from last month.

In October, the quiet tone spread from the dirty tanker market to the clean tanker market, with overall freight rates healthier. On average, the clean tanker spot freight rates gained 14.6% from a month earlier, the gain being reflected across all reported routes, with the exception of Northwest Europe-to-US route, which experienced a drop of 5.5%. Despite the gain in October, the amount of increase in freight rates was not what the owners had hoped for. The stronger trend seen at the end of September did not last long. Activity in the clean market declined, and even during the days when it registered a fair amount of activity, the abundant tonnage supply prevented rates from achieving any remarkable gains. While long-range vessels were mostly affected by the lower demand in October, medium-range tankers saw just a few days of a firmer trend, which did not lead to a worthwhile increase in freight rates; yet it prevented the rates from declining.


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Related Articles: General  LNG Carriers  LNG Terminal  Natural Gas Storage  Oil and Gas Pipeline  Oil Storage  Railways  Tank Truck  Tankers 


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