Tanker Market - Sep 13

Source: OPEC_RP130909 9/10/2013, Location: Europe

According to preliminary data, OPEC spot fixtures dropped in August from the previous month. Middle East-to-East fixtures declined by 0.92 mb/d to stand at 5.37 mb/d, while Middle East-to-West fixtures declined by 0.77 mb/d to stand at 2.77 mb/d. As a result, global fixtures fell 10% or 1.96 mb/d compared to a month earlier to stand at 17.3 mb/d. Compared to a year ago, global fixtures and OPEC fixtures were both 5% higher.

Preliminary data also showed that OPEC sailings declined in August by 0.63 mb/d to average 23.71 mb/d. OPEC sailings were 1% lower than a year earlier. All arrivals showed a decline from last month, with North American arrivals dropping the most, falling 10% to average 8.82 mb/d. European and Far Eastern arrivals both declined by 2%, while West Asian arrivals dropped slightly by 0.04 mb/d from July.

Dirty tanker sentiment remained under pressure in August, particularly for very large crude carriers (VLCCs), while Suezmax reported a rise in freight rates of 8% compared with one month earlier. Aframax freight rates were mixed: while rates in the East dropped on the back of low activity, they increased by WS 14 points in the Caribbean as lighterage operations stimulated the market. On average, dirty freight rates closed the month flat.

On the other hand, clean tanker freight rates increased by 4% over the previous month, mainly as a result of an increase seen in East of Suez, which rose by 14% on the back of increased demand for both long-range (LR) and medium-range (MR) tankers, while freight rates in West of Suez were flat from last month.

The VLCC market was particularly active in the first week of August for Middle East loading, yet the amount of activity was not reflected in freight rates gains; on the contrary, freight rates were under pressure, mainly due to a tonnage build up in that part of the world. Interest in West Africa for VLCCs was waning, and freight rates declined as they followed the trend in the Middle East. Market movement maintained its slow pace even when September requirements arrived, as continuous vessel availability generally left charterers in no rush to secure their requirements; this was also encouraged by the declining trend in freight rates. Owners were hoping for the market to stabilise, as their tactics were unable to prevent rates from declining. Freight rates for west-bound fixtures were no better; they were reported to be lower, in combination with low activity. Holidays in the UK added some pressure on westbound spot freight rates. The end of the month saw enhanced activity, however freight rates remained stable at the low rates seen earlier, with the tanker market remaining under the influence of abundant vessel supply. Consequentially, both Middle East-to-East and Middle East-to-West spot freight rates decreased by 21% and 19%, respectively, from the previous month, while spot freight rates on the West Africa-to-East route declined by 15%. In an annual comparison, VLCC freight rates on the reported routes were lower by 8%, 12% and 5%, respectively.

Despite declining sentiment in the VLCC segment, the Suezmax market registered an average increase in its freight rates of 7% over one month ago. The gains were mainly as a result of an active market. In West Africa, freight rates increased in August by 2.0% from July to stand at 59 WS points. This increase came mainly on the back of stable demand for Suezmax and limited activity for VLCC in that area. Demand for vessels loading from West Africa to Indian ports remained high and tonnage demand for Mediterranean loading was stable at the beginning of the month, though it declined later. Freight rates for vessels operating on the Middle East-to-East route increased on the back of delays seen in Indian ports, which forced charterers to find prompt replacements; this was done at premiums over the prevailing rates. In the Caribbean, an expected weather disruption did not materialise, thus vessels’ loading schedules functioned without disturbance, and as a result freight rates and vessel availability remained stable. By the end of August, Suezmax freight rates saw a weakening trend across a number of routes, due in large part to less activity. On a monthly average, reported freight rates for the Northwest Europe-to-US Gulf Coast and West Africa-to-US Gulf Coast routes increased by 13% and 2%, respectively.

Aframax spot freight rates were mixed in August. In general, there has been a notable slowdown in activity in the Mediterranean at certain points and lower tonnage requirements. However, freight rates were seen to be higher due to delays in some ports and supply flow uncertainty in others. Thus, average Aframax spot freight rates for vessels trading on the Mediterranean-to-Mediterranean route ended the month flat to average 82 WS points, while freight rates seen on the Mediterranean-to-Northwest Europe route increased slightly to average 76 WS points over last month’s levels.

Activity in the North Sea and the Baltics increased in August, despite closure of the Primorsk oil terminal for planned maintenance. However, the active market did benefit from higher freight rates, as the well-populated position list eventually thinned due to continuous fuel oil and crude activity, particularly for September liftings. In the Caribbean, freight rates registered their highest increase among other areas. The market firmed as a result of delays and increased lighterage activities, in addition to premiums paid for prompt replacements and tight availability for certain windows. As a result, spot freight rates for vessels operating on the Caribbean-to-US East Coast route saw a worthy increase of 16% to average 104 WS points, while Indonesia-to-East freight rates lost 3 WS points from last month to average 80 WS point in August.

Clean tanker market sentiment was mixed in August, with all reported routes showing positive performance except for the Northwest Europe-to-US route, which declined by 9% from last month. On average, the clean tanker market was up by 4% from a month ago. In the West of Suez, MR vessels were under pressure as a result of a lack of cargoes and low fixing levels. The market did balance itself to a certain extent and freight rates rose back to levels of WS 110 or more after dipping to approximately WS 90 points in the middle of the month. On average, the Northwest Europe-to-US route reported WS 118 in August, down 9% from last month. However, spot freight rates on the Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes increased by 4% and 3%, respectively.

East of Suez clean spot freight rates increased by 14% compared to the previous month. This increase was mainly seen due to a good level of activity registered for LR vessels and a tighter positions list. The positive trend in LR vessels also affected MR vessels, as they were chosen as an alternative to LR tankers when freight rates in that category hit a higher level. Thus, freight rates for both the Middle East-to-East and Singapore-to-East routes edged up by 28% and 4%, respectively, from a month earlier.

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