Tanker Market - May 14

Source: OPEC_RP140509 5/13/2014, Location: Europe

In April, crude oil tanker market sentiment weakened and average spot freight rates dropped on most of the reported routes. On average, dirty tanker freight rates closed down by 4% compared to the previous month. For the VLCC sector, average spot freight rates for reported routes dropped by 5% in April, compared to the previous month, while Suezmax declined by 8% and Aframax was more stable, falling by only 1%. The general softer sentiment in spot freight rates in April came on the back of the continuous tonnage oversupply and weak demand as market activities declined, due partially to a holiday period. Clean tanker sentiment followed the same trend as dirty tanker registering suffered a drop from the previous month and last year, being under the influence of the same factors negatively affecting the whole market.

Spot fixtures
OPEC spot fixtures dropped in April by 7% to stand at 12.59 mb/d. The decline came mainly as a result of a fall in Middle East to East fixtures. Outside the Middle East, fixtures decreased by 16% in April. Compared to the previous month, global fixtures dropped by 7% to stand at 18.11 mb/d.

Sailings and arrivals
OPEC sailings declined by 1% from the previous month to average 23.89 mb/d in April. Arrivals in Europe were higher, while arrivals in North America and West Asia dropped from the previous month by 8% and 2% to stand at 9.54 mb/d and 4.27 mb/d, respectively. Arrivals in Europe stood at 12.19 mb/d compared to the same month last year.

Spot freight rates
The VLCC market continued to suffer from declining freight rates, a downtrend seen since the beginning of 2014 (with the exception of February). Affected by an obvious tonnage surplus in April, freight rates did not show any increase, despite an occasional improvement in market activity as tonnage demand was seen steady in the first decade of the month for West Africa and the Caribbean, while the Middle East market was relatively firm. Middle East to Asia tonnage demand experienced some gains for the second and third decades. Meanwhile, the VLCC market in the West was partially depressed, due to low activity as a result of the Easter holidays. For VLCCs, Middle East to East spot freight rates declined by 5%, Middle East to West rates decreased by 3% and West Africa to East rates dropped by 6% in April, compared to the previous month. On the whole, April was a slow month for the VLCC market with a limited amount of activity and the total number of fixtures on the low side.

Suezmax spot freight rates followed a similar pattern to those of VLCCs. West Africa to the US spot freight rates declined by 6%, while Northwest Europe (NWE) to the US decreased by 10% in April, compared to the month before. The decline of Suezmax spot freight rates came on the back of lower tonnage demand seen in several regions. Freight rates declined despite an increase in tonnage demand for West Africa loading which indeed led to higher freight rates. However, that was short lived as freight rates dropped when demand eased off. Rates were seen declining in the Black Sea following a minimal pre-holiday rush, while transatlantic freight rates were negatively affected by lower trade. Besides the monthly drop in freight rates, rates on tankers operating on the West Africa to US routes reflected the only drop on an annual basis among all other reported routes, despite the decline being minor. Suezmax was chosen as an alternative to Aframax on a part-cargo basis when Aframax freight rates firmed.

Aframax spot freight rates ended the month with a slight drop of 1% on average, compared to the previous month. Aframax spot freight rates showed a mixed performance in April on the selected routes, lthough rate changes on all selected routes were considered minor.

The Aframax market in the Mediterranean suffered from growing competition between shipowners, which led to a drop in freight rates. Aframax spot freight rates experienced small declines with Mediterranean to Mediterranean rates losing 2% and Mediterranean to Northwest Europe rates declining by 5% in April, compared to the previous month. The monthly average reflected declines, despite rate gains registered in the first half of the month as a result of some delays and increased activity in the region. However, loading cancelations at Cayhan Port and limited inquiries, due to the holidays, absorbed any increase in rates.

Prompt replacements in the Caribbean firmed spot freight rates for aframax in April. However, rates then suffered a downward correction as the number of cargoes declined, while vessel availability increased. On average, Caribbean to the US Aframax spot freight rates were almost stable in April, compared to the previous month,

Clean spot freight rates
Sentiment in the clean tanker market weakened in April and spot freight rates on reported routes dropped in comparison to a month earlier with the exception of tankers trading on the Singapore to East route. West of Suez clean spot freight rates registered a strong decline of 21%, while East of Suez rates edged down by 4% in April compared to the previous month. The declining trend of freight rates, which has been persisting over the past few months, continued in April, despite a number of factors that should have supported rates, such as storage ullage issues in Europe and increased naphtha shipments to Japan. In the East of Suez, the Middle East to East clean spot freight rates dropped by 11%. However Singapore to East rates showed a slight gain of 2% in April over the previous month. In West of Suez, clean spot freight rates from NWE to the US dropped by 15% from the previous month, while the drop in both reported routes in the Mediterranean was higher. Mediterranean to Mediterranean and Mediterranean to Northwest Europe freight rates dropped by 25% and 23%, respectively.

The clean tanker market suffered from low trade in the Atlantic, thus low freight rates, despite higher activity by the end of the month, which was due to increased US gasoline imports. Inquiries in the Mediterranean were limited and the tonnage list maintained over-populated.

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