Tanker Market - Aug 13

Source: OPEC_RP130809 8/10/2013, Location: Europe

According to preliminary data, global spot fixtures increased in July from the previous month by 8%, or 1.45 mb/d, to average 19.23 mb/d. OPEC spot fixtures also increased by 1.36 mb/d over a month ago to average 14.35 mb/d. Annually, global and OPEC fixtures went up by 7.5% and 5%, respectively.

OPEC sailings, as per preliminary data, increased in July from last month to average 24.36 mb/d. Arrivals in North America, Europe and the Far East increased by 0.86 mb/d, 0.47 mb/d and 0.3 mb/d from last month, to average 9.87 mb/d, 12.46 mb/d and 8.73 mb/d, respectively, while arrivals in West Asia declined by 0.15 mb/d to average 4.26 mb/d. Arrivals in all reported regions were up in July from the same month a year earlier.

A general positive trend was detected in the dirty tanker market. Spot freight rates for crude oil tankers increased in July across most reported routes. While the average spot freight rate for Suezmax saw the strongest gain, increasing by 13% in comparison with the month before, spot freight rates for VLCC and Aframax increased by 3% and 7%, respectively. The increase in dirty freight rates came on the back of higher activities and fixtures seen in the Middle East, in addition to several delays reported in different ports in the world.

The VLCC market saw an active start in July when an influx of inquiries came to correct the downward trend reported earlier. The first week of the month registered a jump of more than 10 WS points for Middle East loadings, mainly for liftings in the first ten days (decade) of July. Tanker owners were trying to get the maximum out of the market, while charterers held back their requirements to prevent rates from achieving further gains. Tight vessel availability for certain dates, in addition to VLCC delays seen in several parts of the world, mainly India and Singapore, together supported freight rates in July. Freight rates stabilized later as activities lessened and tonnage started to build up for August loading and were under pressure by the end of the month.

On average, VLCC spot freight rates for tankers operating on the Middle East-to-East route ended the month flat to settle at 42 WS points, while Middle East-to-West increased by 8% to average 27 WS points. Freight rates seen for tankers operating on West Africa-to-East routes increased by 2.5% from last month to average 41 WS points. This increase came mainly as freight rates in the Middle East increased and despite a stable amount of activity. VLCC freight rates for all reported routes in July were higher than the same month last year, ranging from 4% to 17%.

At the beginning of the month, Suezmax saw an active market for West African loadings however freight rates registered only marginally higher as the increase in rates was less than what was expected. The situation changed later on, when July fixtures were completed as the demand on tankers loading in West Africa clearly reduced as July programme was finalized.

Suezmax saw improved freight rates for tankers operating on West Africa-to-West routes as a steady flow of inquiries entered the market for August loadings. Freight rates increased accordingly, despite vessels supply in the region being sufficient. Therefore the rates for tankers operating from West Africa to the US showed healthy gains of 21% in July over the previous month, while spot freight rates for Suezmax operating on the Northwest Europe-to-US route saw a smaller increase rising by 4% over the last month. Suezmax freight rates in the Middle East firmed mainly as a result of a firmer market for VLCCs, as well as lower number of available tonnage due to ullage problems and delays reported in Indian ports, in addition to busy and active Middle East and Red Sea loadings for both crude and fuel oil.

Aframax average spot freight rates increased by 7% in July from the previous month. This increase has been registered on all reported routes except for the Caribbean-to- US route. Compared with a month earlier, Aframax spot freight rates on the Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes increased by 11% and 7% to average 82 WS and 75 WS points, respectively. This increase came mainly as a result of steady activity of consecutive loading dates coupled with tight vessel availability due to delays seen in the ports of Ceyhan and Trieste which tied up tankers and reduced the amount of available vessels. This created the need for prompt replacements thus increasing the freight rates in that area.

Spot trading of Aframax rates on the Indonesia-to-East route increased by 15% in July from the month before. However, rates are still down by 3% from the same month a year ago. On the other hand, rates between the Caribbean and the US East Coast dropped by 4% in July marking the only negative performance amid the other reported routes. This occurred despite the fact that the Aframax market in the Caribbean was active and often balanced during the month and freight rates increased on several occasions, although the pre-holiday rush of activity, which the owners had hoped for, did not materialize. Caribbean rates dropped significantly by the end of the month due to slow activity and limited requirements to average 90 WS points.

Clean tanker market sentiment was mixed in July, with clean spot freight rates showing a diverging pattern. On average, rates increased by 7% West of Suez and dropped by 13% in the East.

East of Suez, spot freight rates on reported routes Middle East-to-East and Singaporeto- East both dropped significantly by 16% and 10%, respectively, from last month. They averaged 80 WS points and 109 WS points respectively. This decline came on the back of limited activity in the Middle East versus accumulating tanker availability. The same scenario applies to the East, where the limited cargo requirement had led to low freight rates which were barely covering operational costs. Compared with a year earlier, rates from the Middle East-to-East and Singapore-to-East declined by 36% and 12%, respectively, in July.

In contrast, West of Suez spot freight rates reported gains on all routes. Rates for tankers operating on the Northwest Europe-to-US route experienced the largest rate gain as they increased by 10% over the previous month, to settle at 129 WS points. Both Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe rates also increased by 6% to average at 136 WS and 147 WS points from last month. Few tonnage replacements and gasoline arbitrage activity both contributed to these rate increases during the month.

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