Tanker Market - Feb 14

Source: OPEC_RP140209 2/12/2014, Location: Europe

Despite of the decline of VLCC freight rates seen in January compared to the previous month, average dirty spot freight rates remained in the positive zone, supported mainly by a considerable gain registered in both Suezmax and Aframax freight rates. VLCC spot freight rate losses in the first month of 2014 came from lower activities and tonnage oversupply on all VLCC routes. On average, VLCC spot freight rates dropped by 8% from last month. In contrast, spot freight rates for Suezmax and Aframax exhibited an increase over the previous month by 18% and 50%, respectively. Those gains were driven by bad weather conditions, shortage of suitable tonnages and increased activities. Clean tanker sentiments were bearish on most reported routes with an exception of Northwest Europe-to-US where cold weather and gasoil trade increased tonnage demand and freight rates.

Spot fixtures
OPEC spot chartering declined by 0.5% in January compared to the previous month to reach 13.06 mb/d, according to preliminary data. Within the Middle East, spot chartering towards the East displayed a drop of 5%, while those towards the West lost 1.5%. The Middle East-to-East spot chartering ended the month at 6.08 mb/d, less than the 6.40 mb/d in December, while the Middle East-to-West route ended the month at 2.76 mb/d, lower from the 2.8 mb/d registered one month ago. On a y-o-y basis, OPEC spot chartering in December showed an increase of 6% compared to the same month a year ago, while global spot chartering declined in January by 3.4% compared to the previous month to stand at 18.76 mb/d. However, this was 12% higher compared to the same month a year ago.

Sailings and arrivals
Sailings from OPEC were 0.2% lower in January, standing at 23.8 mb/d, down from 24 mb/d in the previous month, while still 9% higher than in the same month a year ago. Middle East sailings in January averaged 17. 44 mb/d, down 1% from both the previous month and the previous year.

Crude oil arrivals in the North America increased by 6.4% in January compared to the previous month. In contrast, compared to December, crude oil arrivals to Europe, the Far East and West Asia were all lower in January by 1.6%, 4.8% and 4.7%, respectively.

Spot freight rates
After VLCC spot freight rates achieved the least gains in the previous month, the new year saw a slow start for VLCC while tonnage build up started accumulating as the level of activities kept waning. At that point the limited number of inquiries kept attracting many offers. Thus, the increased competition kept VLCC freight rates under pressure beginning of January mainly in the Middle East. VLCC freight rates in West Africa followed a similar trend to those in the Middle East. However, fixtures across the Atlantic were done at higher levels as a result of a firm Suezmax market. VLCC spot freight rates fluctuated dramatically during the month as the freight rates drop seen in the first half of the month was corrected in the second half as a result of a firmer market and a tighter tonnage list, particularly for February loadings. A VLCC freight rates surge was seen in several regions: Middle East, West Africa and the Caribbean. The last couple of days in January registered a drop in freight rates with a downward trend seen in freight rates as the first decade of February requirements were mostly fulfilled. As a result of several gains and losses seen during the month, average spot freight rates for tankers operating from the Middle East-to-East showed the highest decline from the same class operating in the different routes, dropping by 10% from the previous month to average WS 57 points. Freight rates for VLCC trading on both Middle East-to-West and West Africa-to-East showed drops of 8% and 7%, respectively, in January from a month ago. Despite the drop on a monthly comparison, freight rates registered for VLCC on all reported routes were significantly higher than those registered in the same month of 2013. A whole number of fixtures in January were found to be lower than in previous months.

Suezmax spot freight rate developments in January followed a pattern opposite to VLCC rates, as average rates increased by 18% compared with the previous month as the rate for Suezmax operating on the West Africa-to-US route and Northwest Europeto- US routes both increased by 18% from a month earlier. Suezmax freight rates continued their rising trends as seen in 3Q13. Suezmax continuous freight rates gains were mainly supported by high activity and constant delays caused by adverse weather conditions, which increased the need for prompt replacements. Moreover, the tremendous increase for Aframax freight rates, particularly in the Caribbean, had a spillover effect on Suezmax freight rates as it supported freight rates.

Aframax spot freight rates experienced the biggest gains in January, compared with the previous month. The average rate increased by a remarkable 50% on the reported routes. In East of Suez, the rate on the Indonesia-to-the-East route exhibited the smallest increase amid other routes, increasing by 4%. While in West of Suez, the Caribbean-to-US rate reflected a bounce of 68% from a month ago, while the Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe rates increased by 64% and 61%, respectively. These worthy gains were driven by a tightening in tonnage supply, an increase in delays in the Turkish Straits as worsening weather conditions lead to prolonged total transit time and increased activity in the Mediterranean coupled with a noticeable shortage in available vessels.

Clean spot freight rates
The clean tanker spot freight rates showed a mixed pattern in January. Clean West of Suez spot freight rates gained 3% on average. This gain came mainly as a result of higher freight rates registered for tankers operating on the Northwest Europe-to-US route which exhibited healthy growth of 15% to stand at WS 144 points compared to last month. The upward momentum in spot freight rates in the West was supported by cold weather in the US and open gasoil arbitrage. In the Mediterranean, clean spot freight rates slightly declined in January compared to the previous month, as weather delays seen in the Turkish Straits could not support freight rates. Clean spot freight rates for tankers moving between both sides of the Mediterranean dropped by 1% in comparison to a month ago. In the East, clean tanker spot freight rates from the Middle East-to-East experienced a drop of 12% compared to the previous month to average WS 90 points. While Singapore-to-East freight rates were also affected negatively as they dropped by 6% from last month to average WS 108 points despite steady tonnage demand for naphtha trade seen occasionally during the month.

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