Tanker Market - Nov 13

Source: OPEC_RP131109 11/12/2013, Location: Europe

In October, OPEC spot fixtures maintained the same level as seen in the previous month to average 13.2 mb/d as per preliminary data. Both Middle East-to-West and Middle East-to-East were higher by 0.32 mb/d and 0.41 mb/d, respectively. This increase was offset by the decline seen from fixtures out of the Middle East, which dropped by 0.72 mb/d. On a y-o-y basis, OPEC spot fixtures in October were 9% higher.

Sailings from OPEC were relatively steady at 23.87 mb/d compared with 23.75 mb/d in the previous month, yet 1% higher than a year earlier. Middle East sailings stood at 17.58 mb/d, up from 17.45 mb/d in September and 1.7% higher than a year earlier. Crude oil arrivals in North America and the Far East gained by 0.85 mb/d and 0.25 mb/d to stand at 9.95 mb/d and 8.42 mb/d, respectively. Europe and West Asia arrivals decreased slightly by 0.04 mb/d and 0.36 mb/d to stand at 12.03 mb/d and 4.32 mb, respectively.

In October, dirty tanker spot freight rates exhibited m-o-m and y-o-y gains on several reported routes ahead of the winter season. The VLCC sector saw steady gains during the month as it reported a higher number of fixtures and increased trade to the East from the Middle East and West Africa. On average, VLCC freight rates edged up by 17% from September. While both Suezmax and Aframax saw a mixed pattern in October, the monthly average reported lower rates by 1% and 4%, respectively. On the other hand, clean tanker spot freight rates exhibited a decline on almost all its routes in October compared with the previous month. The greatest drop came from Northwest Europe (NWE) to the US as a result of lower gasoline imports. In October, spot freight rates in the West of Suez market dropped by 11%, while East of Suez rates were down by 3%.

In the dirty market, VLCC spot freight rates showed a healthy gain of 16% on average in October, compared with last month to stand at WS37 points. VLCC freight rates in October were 10% higher than during the same period a year ago. The strongest gain was registered on the Middle East-to-East route, where freight rates averaged WS41 points, up by 17% from a month ago and 14% from last year. VLCC freight rates have not reached the WS40 mark in several months and only on rare occasions in 2013 so far. In general, the month started with a moderate level of activity, partially due to holidays in the east, but activity picked up considerably at a later stage, leading to a moderate gain in freight rates, which mainly resulted from ship owners’ resistance to low rates. However, since the vessel positions’ list tightened significantly to less than seen for some time, ahead of the flow of November requirements, freight rates firmed considerably as tonnage demand was steady while high activity levels continued at a stable rate. VLCC spot freight rates on the West Africa-to-East route showed approximate gains compared to VLCCs trading on the Middle East-to-East route, which increased by 16.7% in October to stand at WS42 points following the same rising trend. VLCC spot freight rates on the Middle East-to-West route were also up in October by 12% to average WS28 points. Generally, VLCCs on all reported routes experienced a rewarding month with increased freight rates registered on monthly and annual comparisons, driven by higher activity and thus a higher number of fixtures.

Suezmax did not encounter a real spillover effect from VLCCs in October, despite showing a mixed performance, where spot freight rates for tankers trading on the West Africa-to-US route increased by 2% from September to average WS42 points while rates on the NWE-to-the US route dropped to stand at WS78 points. The month started with low tonnage demand combined with low freight rates, however rates for Suezmax on several routes improved afterwards with slight-to-medium gains. Rates for West Africa loading increased due to active cargo movement and reasonable activity was registered for the North Sea and the Baltics, while prompt cargo requirements were reported in the Mediterranean and Black Sea. All of this did not boost freight rates, mainly due to charterers’ constant attempts to halt the rising freight rates trend.

Aframax spot freight rates showed similar mixed patterns as seen in Suezmax. On average, spot freight rates decreased by 4% in October compared with the previous month to stand at WS76 points. Spot freight rates for Aframax trading on the Indonesiato- East route registered the only gain in October to average WS79 points, up by 4% from last month, but 18% lower than the same month a year before. Aframax spot freight rates for the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes registered a drop from September to average WS70 points and WS63 points, respectively. Compared with last month, this drop was mainly driven by a lack of cargoes. Freight rates on the Caribbean-to-US East Coast (USEC) route showed the largest decline of all reported routes as a result of a surplus in tonnage supply. Overall, Aframax freight rates registered on all reported routes in October were lower than a year earlier.

Clean spot freight rates reported negative performance on all routes in October, with the exception of freight rates on the Singapore-to-East route, which were flat from a month ago. On the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes, both dropped by 6% and 5%, in October, to average WS113 and WS123 points, respectively. Clean market freight rates remained weak during the month, despite single days of higher activity.

Lower US gasoline exports from Europe were the main driver behind the drop in medium-range (MR) spot freight rates on the NWE-to-US routes, which declined by 25% from a month ago. Clean spot freight rates remained weak on the Middle East-to- East route, dropping by 6% from last month. The general downward trend detected in the clean tanker market in October affected both MR and long-range (LR) vessels as high tonnage availability and lower product trading kept spot freights constantly under pressure.

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