Tanker Market - Feb 13

Source: OPEC_RP130209 2/12/2013, Location: Europe

In January, global fixtures declined by 8% compared with the previous month. OPEC spot fixtures were down as well, by 0.95 mb/d, or 6.6%, to average 13.5 mb/d, according to preliminary data. The drop in OPEC fixtures came as a result of the decline registered in both Middle East-to-East and Middle East-to-West fixtures, as both declined in January by 0.89 mb/d and 0.51 mb/d, respectively. While fixtures from outside the Middle East saw a smaller decline of 0.46 mb/d, or 10.5%, from a month earlier to average 4.81 mb/d. On an annual basis, all fixtures were found to be higher than last year’s level. Preliminary data showed that OPEC sailings declined in January by 0.73 mb/d, or 3%, to average 23.63 mb/d, and sailings from the Middle East dropped by a similar amount to average 17.31 mb/d. However, compared with the same month last year, OPEC sailings were 1.6% higher while sailings from the Middle East were 1% lower. January arrivals in all areas were seen lower on a monthly basis, with the greatest decline registered on arrivals in North America ports, which dropped by 0.89 mb/d, or 8.4%, to average 9.67 mb/d. Arrivals at European ports were down by 0.15 mb/d, or 1.3%, from the previous month. Arrivals at ports in the Far East and western Asia both declined by 0.01 mb/d and 0.02 mb/d, respectively.

January proved to be a sluggish month in the tanker market, with freight rates falling in several parts of the world. Both dirty and clean tanker spot freight rates were bearish in January, with declines seen compared to December 2012. The decline of freight rates came partially as Worldscale (WS) flat rates increased by almost 9% as a result of an increase in bunker prices. On the other hand, the position list was lengthy as the tonnage availability remained sufficient during the month. The decline in dirty rates was experienced on most reported routes with the exception of Suezmax trading Northwest Europe-to-US Gulf and Aframax trading on the Mediterranean-to-Northwest Europe route. In the clean market, rates on all reported routes dropped except on Northwest Europe-to-US. In the dirty tanker segment, VLCC spot freight rates declined by 18% while Suezmax and Aframax saw an approximate decline from last month of 5% and 6%, respectively. In the clean tanker segment, the situation was not better as the market was very quiet with generally low activity. As a result, freight rates in East of Suez dropped by 18.5% and freight rates in West of Suez declined by 3%.

Although the beginning of the month witnessed an increase in the activity level which was seen on VLCC vessels in particular, even that was not capable of increasing the rates as they stayed almost stable at that point. Activity slowed down by the middle of the month as the January programme was completed with a number of fixtures finding less than what owners had hoped for. The limited number of inquiries and fixtures led to an increase in the competition seen from different owners, as each inquiry attracted a large number of offers, thus dragging freight rates down. VLCC spot freight rates experienced the biggest declines in January compared with the previous month. The average rate fell by 18% on the reported routes. In a monthly comparison, spot freight rates for VLCCs operating from the Middle East-to-East and from the Middle East-to-West both declined in January by 19% and 17%, respectively, as less interest for loading was seen from charterers and inquiries remained limited amid a long list of available tonnage. Rates for VLCCs operating on the route from West Africa-to-East also declined in January by a similar 17%. The drop in rates was mainly driven by the increase in the 2013 WS flat rate on the back of higher bunker prices.

Suezmax freight rates showed the same pattern as they dropped by an average of 5% in January from last month. The Suezmax market was slow and mainly controlled by the surplus in tonnage which was available all the time to cover any prompt requirements. The effects of delays seen at Turkish straits and adverse weather conditions remained limited and had no impact on freight rates. With the amount of available tonnage, replacement vessels were secured easily once needed. Activity for West Africa loading declined as the number of vessels exceeded cargo requirements. Consequently, freight rates declined on average, although they saw an enhanced sentiment towards the end of the month as charterers showed more interest in some dates which became tight. Spot freight rates for vessels operating West Africa to US Gulf coast declined by 14% from the previous month to average 57 WS points. On an annual comparison, the rates on said route dropped by 35%, while spot freight rates for Northwest Europe-to-US East Coast/Gulf Coast saw an increase of 6% from a month earlier, yet a drop of 22% from last year’s level. This monthly gain came as result of a more balanced vessels situation as tonnage availability was tight for some dates in February.

Aframax spot freight rates followed the same pattern as seen in other dirty vessel classes in January. Tonnage demand was limited versus ample vessel supply. Generally, Aframax freight rates had a softer sentiment in January as tonnage built up during the month dragged the freight rates down. The Caribbean Aframax market had a quiet feel in general with softer rates, as the tonnage available exceeded the number of cargoes. Aframax Caribbean-to-US East Coast spot freight rates showed a decline of 6% from the previous month; yet the decline was greater on a yearly basis as they dropped by 27% to average 85 WS points. Freight rates for vessel operation on the Mediterranean-to-Mediterranean experienced a similar monthly loss, as it declined on average by 6% to settle at 80 WS points. The rate on the Indonesia-to-East route experienced the greatest decline amid other reported routes in January as it fell by 13% to average 80 WS points. Mediterranean-toNorthwest Europe was the only route which saw an increase, though minor, in January, increasing by an average 1.3% or 1 WS point.

In the clean tanker market, spot freight rates weakened on almost all reported routes in January. West and East of Suez clean tanker spot freight rates followed the same pattern, with average rates on both reported routes declining in January by 3% and 18%, respectively. Freight rates dropped as a result of a quiet market and access tonnage availability in general, despite medium range vessels seeing a rush of activities during the first few days of the month as the arbitrage was open. Rates were softer while long range vessels registered a lower number of fixtures. The best that owners could do was maintain the last rates obtained and prevent them from falling further from one month to the other. The only route which registered a gain was Northwest Europe-to-the US as freight rates increased by 8%. The increase in said route came on the back of an increase in gasoline cargoes in the US. Meanwhile, the Middle East-to-East route witnessed the greatest decline of 24%. The rate for tankers operating on the Singapore-to-East route declined by 13%, while those for the Mediterranean-to-Mediterranean and the Mediterranean-to-Northwest Europe dropped by 6% and 8%, respectively.

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