Tanker Market - September 2014

Source: OPEC_RP140909 9/10/2014, Location: Europe

Weak sentiment continued to dominate the crude oil tanker market in August. Tanker freight rates registered a drop of 20% and 11%, respectively, for Suezmax and Aframax classes, while VLCC closed the month with freight rates at levels similar to those of the previous month. Dirty tankers suffered from a slow market and limited activities, amid ample tonnage supply. VLCC freight rates ended flat in August compared to the previous month, as all reported routes saw no change. Suezmax freight rates stayed under pressure, in part due to competition from VLCC carriers. In contrast, Aframax freight rates dropped on all selected routes with the exception of the Indonesia-to-East route. Rates in the Mediterranean fell on average, despite increased requirements and premiums.

Clean tanker sentiment showed an improvement, particularly for long-range (LR) tankers trading in the East, while medium-range (MR) tanker rates experienced a mixed performance, improving for eastern fixtures while slightly dropping in the West.

Spot fixtures
Following the gains achieved a month earlier, OPEC spot fixtures dropped in August by 3.9%. The decline came mainly on the back of lower fixtures registered for both eastbound and westbound destinations, while global fixtures declined by 4.5% from one month earlier. Compared with one year ago, OPEC and spot global fixtures were down by 2.3% and 0.9%, respectively.

Sailings and arrivals
OPEC sailings were also lower in August, dropping from the previous month and a year earlier by 0.6% and 1.2%, respectively. According to preliminary data, arrivals at North America, Europe and West Asia increased by 3.2%, 0.5% and 1.1%, respectively, from July. The Far East was the only route which saw a decrease; it was down by 1.3% from the previous month’s arrivals.

Spot freight rates
Crude oil tanker chartering activity had a slow start at the beginning of August. The tanker market remained weak, as charters had the upper hand and the number of offers was on the high side. Freight rates dropped in the Middle East and West Africa due to sluggish chartering activities in the first week before the trend reversed in both regions. Freight rates in the Middle East saw a gradual increase, achieving a few world scale (WS) point gains, while in the West the gains were smaller, despite the relatively limited tonnage supply. The Middle East market received further support as September requirements were placed. The same scenario was repeated in West Africa and rates remained close to those in the Middle East. Tonnage requirements were stable in the West African market, supported by a stronger Middle East market, as tonnage availability was thinning in both regions as well as in the Caribbean. The upward trend for the VLCC market was short-lived as freight rates dropped towards the third decade of the month, affected by a slower flow in tonnage requirements and tanker build-up.

The number of VLCC fixtures was on the low side as some VLCC requirements were shifted to Suezmax vessels due to the weak Suezmax market. On average, VLCC freight rates were higher by a slight WS1 point from the previous month as the Middle East-to-East route ended the month flat at WS49 points, while the Middle East-to-West route averaged WS30 points in August and the West Africa-to- East route averaged WS51 points. Generally speaking, most VLCC rates were at the same level as the previous month.

Suezmax experienced the highest freight rate drop in August among other dirty tanker classes, down by 19% from one month earlier. Freight rates were under pressure despite a suitable amount of activity at the beginning of the month, which was not enough to prevent rates from declining. On the other hand, tonnage demand was seen to be weak in different regions, including the Black Sea, the Middle East and West Africa, and tonnage build-up was increasing. As a result, Suezmax freight rates declined in August on both reported routes. Suezmax spot freight rates on the West Africa-to-US Gulf Coast (USGC) route decreased 25% to stand at WS64 points compared with the previous month, mainly due to an over-populated tonnage list as ballasters increased to West Africa, while the Northwest Europe-to-US East Coast (USEC)/USGC decreased by 15% from July.

The Aframax sector followed the same pattern as Suezmax in August. On average, Aframax freight rates dropped by 11% from the previous month as all selected routes registered declines, except the Indonesia-to-East route, which increased by 10%. Aframax freight rates declined on average despite occasional jumps in freight rates in the North Sea and the Baltics as a result of tight availability on certain days in the second decade. Rates were soon corrected down once the congested dates passed. Caribbean-to-USEC spot freight rates registered the highest drop, averaging WS113 points, down by 29% from one month earlier. Movement in the Caribbean tanker market was slow, firm inquiries were limited and ships were available even for prompt requirements. Aframax rates in the Caribbean stabilized by end of the month following a continuous decline. Aframax market spot freight rates in the Mediterraneanto- Mediterranean and Mediterranean-to-Northwest Europe routes experienced a similar drop, declining from the previous month’s level by 8% and 9%, respectively, to stand at WS95 points and WS88 points. Aframax monthly average rates in the Mediterranean dropped in spite of increased activity and berthing delays at Trieste port. However, compared with one year earlier, spot freight rates from the Caribbean-to-the US increased by 8% in August. In the Mediterranean market, spot freight rates from the Mediterranean-to-Mediterranean and from the Mediterranean-to-Northwest Europe routes increased by 15% each in August compared with the previous month.

Clean spot freight rates
Following several months of decline, clean market spot freights increased by 4% m-o-m in August, nevertheless experiencing mixed patterns. On average, East of Suez spot rates increased by 11% while West of Suez route rates declined by 1%. The LR class saw tight availability in August, which supported freight rates for the sector, particularly in the East, where the market was active. MR tanker freight rates for eastbound destinations showed gains from the previous month. Middle East-bound freights saw a rate increase of 20% and Singapore-bound tankers saw clean spot rates grow by 3%. Freight rates for tankers trading on the Northwest Europe-to-USEC increased by 4% to average WS91 points, despite the ships’ list being well populated. Activity in the Mediterranean remained limited before picking up slightly by the end of the month, though there was no significant improvement in rates, as the Mediterranean-to- Mediterranean and Mediterranean-to-Northwest Europe routes both experienced a decline of 3% m-o-m to stand at WS117 and WS127 points, respectively.

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