Tanker Market - July 14

Source: OPEC_RP140709 7/1/2014, Location: Europe

The tanker market for crude oil and petroleum products showed a differing performance for different tanker segments in June. In the dirty market, spot freight rates for VLCCs experienced an increase on all reported routes. Compared to the previous month, the increase in VLCC freight rates resulted mainly from higher activity versus lower tonnage availability in West Africa and the Middle East to both eastbound and westbound destinations. On average, VLCC freight rates increased by 8% in June from the previous month. Suezmax freight rates saw higher gains by 17% in June from a month ago, as the tonnage list proved tight for some dates, mainly on the back of the active West African market. On the contrary, Aframax spot freight rates showed a decline of 1% in June from the last month. Although this slight decline resulted from a mixed pattern seen on different routes, Aframax freight rates did not encounter significant changes during the month as rates were reported flat, often despite port delays and increased lighterage activity, leading to higher tonnage demand.

At the same time, clean tanker spot freight rates did not experience volatility in June as they were reported flat due to little movement in the market. On average, East of Suez spot freight rates were stable from last month, while West of Suez increased by 4%.

Spot fixtures
In June, estimated OPEC spot fixtures increased by 4% compared with the previous month to average 12 mb/d. Global spot fixtures increased by 3% in June compared with the previous month to average 17.28 mb/d. Those gains in fixtures came as mainly OPEC fixtures increased by 0.48 mb/d from last month. The increase was driven by higher fixtures from outside the Middle East but was offset by lower chartering activity in the Middle East to both eastern and western destinations.

Sailings and arrivals
OPEC sailing dropped by 0.16 mb/d in June from last month to stand at 23.31 mb/d. The drop came as sailings from the Middle East dropped by 0.14 mb/d. On the other hand, arrivals showed an increase in June at all ports. North America, Europe the Far East and West Asia’s arrivals registered gains by percentages ranging between 0.3% and 1.1% compared with last month to stand at 9.4 mb/d, 12.61 mb/d, 8.66 mb/d and 4.39 mb/d, respectively.

Spot freight rates
The VLCC segment of the market showed improved sentiment for freight rates registered on all reported routes in June. However, VLCCs experienced a very slow start at the beginning of the month as only very few new requirements were received as charterers kept holding back their inquiries to maintain freight rates at low levels. These low freight rates for both eastbound and westbound destinations kept daily earnings depressed whereby ship owners were barely able to cover operational costs and VLCC freight rates at the beginning of June reached their lowest levels since the start of 2014. Market activity at the beginning of the month was affected by shipping events in Greece, while the second week of June saw increased activity, resulting in enhanced freight rates for VLCCs due to higher loadings from West Africa and the North Sea. Tanker owners showed a resistance to low offers to protect their gains from falling back as the number of offers given for each inquiry was lower than at the beginning of June. West Africa fixtures were maintained at a healthy level as July requirements were sought in the market and rates adjusted up relatively, yet gains remained marginal. Activity in the Atlantic was healthy, while freight rates in West Africa-to-East increased as a result of strong activity combined with a shortening tonnage list. In comparison with the previous month, Middle East-to-East spot freight rates increased by 10% to stand at WS40 points, West Africa-to-East increased by 9% to stand at WS42 points and Middle East-to-West gained a slight 4% to stand at WS27 points. However, on average, for all selected routes, VLCC spot freight rates saw a marginal increase of WS2 points from the month before.

In June, Suezmax spot freight rates increased by 17% on average from the previous month while showing a sizeable gain of 33% from the same month a year ago. This increase in rates mainly resulted from higher freight rates registered for tankers trading on the West Africa-to-US Gulf Coast (USGC) route, which went up by 19% from the previous month to average WS67 points. The Suezmax market in West Africa was quiet with freight rates remaining flat at the beginning of the month as firm inquiries were limited and rates softened further before increasing ahead of the flow of July’s requirement in which the availability of tonnage appears to be considerably lower. Fixtures to western destinations were also higher as the number of offers received for each inquiry decreased, suggesting tightness in vessel availability on some days. Freight rates for tankers trading on Northwest Europe-to-USGC were up by 15% in June from last month to average WS59 points. In the Middle East, the Suezmax market firmed as the tonnage list thinned towards the end of the month in combination with the firming VLCC market in West Africa. The Suezmax market in the Mediterranean and Caribbean experienced several ups and downs during June as the level of activity in the market varied during the course of the month, affecting tonnage demand and freight rates.

Aframax spot freight rates on most selected routes showed a drop from a month ago, the only exception being freight rates registered on tankers operating on the Indonesiato- East route as it showed an increase of 8% to average WS96 points. The Aframax market lacked activity in several regions while vessels were in surplus, leading to an increased number of offers versus limited firm inquiries. This scenario was repeated in the North Sea, the Baltics, the Mediterranean and the Black Sea. Mediterranean-to- Mediterranean Aframax spot freight rates stood almost at the same level as last month, while Mediterranean-to-Northwest Europe freight rates declined by 4% in June. Rates in the Mediterranean did not show great changes despite port delays as even prompt replacements were secured at market levels with no premiums. Aframax spot freight rates in the North Sea and the Baltics did encounter gradual freight rate gains towards the end of June as requirements were secured and tonnage availability thinned. Rates in the Caribbean held stable at the beginning of the month before encountering an upward correction in freight rates on the back of increased lighterage activity, however those increases were short-lived as freight rates did drop afterwards due to low tonnage demand. Caribbean-to-US rates declined 7% in June from the previous month to average WS107 points.

Clean spot freight rates
In the clean tanker market, spot freight rates showed diverging trends. In the East of Suez, clean freight rates were mostly soft during the month, while medium-range tankers trading on the Singapore-to-Japan route had an adequate level of activity, however that was not reflected in any WS point increase as rates remained stable. Therefore, Singapore-to-East spot freight rates stood as seen in the previous month at WS111 points in June. Meanwhile, Middle East-to-East clean freight rates dropped slightly by WS1 point to average WS110 points. In the West of Suez, spot freight rates were better than in the East. Freight rates for cross-Mediterranean voyages increased on the back of busier markets. Therefore, clean spot freight rates in Mediterranean-to- Mediterranean and Mediterranean-to-Northwest Europe increased by 7% for each to stand at WS124 and WS134 points, respectively. On the other hand, freight rates for tankers operating on Northwest Europe-to-US experienced a drop of 5% to average WS99 points in June as a result of low product shipments to the US.

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