Tanker Market - November 14

Source: OPEC_RP141109 11/12/2014, Location: Europe

In October, tanker spot freight rates for dirty and clean vessels saw gains across various classes, with Suezmax rates encountering the strongest growth among all classes. Both crude and product spot freight rates registered gains in October on most reported routes compared with the previous month and year. In the dirty segment, VLCC, Suezmax and Aframax spot freight rates increased by 15%, 19%, and 17%, respectively, over the previous month. The improvements were driven by winter demand, tonnage demand for Asian requirements and increased delays at several ports. Altogether, these factors led to shorter tonnage supply, especially as the market turned date sensitive. VLCC and Suezmax freight rates were also supported by a stronger tanker market in the Middle East and West Africa, while lighterage activities supported Aframax freight rates in the Caribbean. Clean tanker freight rates were mixed in October, with West of Suez rates increasing by 22%, while East of Suez rates remained weak, flat from one month earlier, due to the continuation of surplus tonnage availability. Compared annually, clean tanker freight rates for both Suez directions were up over one year ago, by 22% on average.

Spot fixtures
In October, OPEC spot fixtures increased by 12.5% from the previous month to average 18.22 mb/d, according to preliminary data. The increase came on the back of higher spot fixtures from the Middle East-to-East and Middle East-to-West routes and outside the Middle East region, and were up by 1.29 mb/d, 0.21 mb/d and 0.19 mb/d, respectively, in October to average 7.09 mb/d, 1.66 mb/d and 4.18 mb/d. Seasonal demand supported the fixture increase in October.

Sailings and arrivals
OPEC sailings increased by 0.87 mb/d or 4% in October to stand at 24.16 mb/d, supported by an increase in Middle East sailings, which rose by 0.82 mb/d or 5% over the previous month to average 17.80 mb/d. Crude oil arrivals increased in October in most regions. Arrivals at North American, European and Far Eastern ports increased by 10%, 1% and 4%, respectively, compared with the previous month, while arrivals in West Asia showed a drop of 3% from the previous month.

Spot freight rates
In the dirty market, VLCC spot freight rates gained 15% on average in October, compared with the previous month, to stand at WS41 points. VLCC Middle East-to-East spot freight rates showed the strongest gain, up by 18% in October to stand at WS48 points, followed by freight rates registered for tankers trading on the West Africato- East route, which rose by 13% to average WS51 points. VLCC market and freight rates in October were supported by a lack of suitable vessels seen at the beginning of the month, while the following weeks often proved to be date sensitive. Higher activity shortened the tonnage list mainly for VLCC vessels loading in West Africa and the Middle East. VLCC spot freight rates on the Middle East-to-West route remained modest in October, increasing by a slight WS3 points to average 26 points, unaffected by increased activity in other regions. The Middle East-to-West route saw the only freight rate drop from the previous year among all routes, remaining 9% lower than in October 2013.

Suezmax spot freight rates showed the strongest gain in the dirty market as they rose by 19% on average in October compared with the previous month to average WS67 points. It is the highest Suezmax freight rate increase in four months. The average increase came mainly on the back of higher freight rates registered in West Africa. Suezmax spot freight rates for tankers operating on the West Africa-to-US route increased by 30% in October to stand at WS75 points, and rates on the Northwest Europe-to-US route gained 6% to stand at WS60 points. Freight rates for both routes were remarkably higher than seen for the same month one year ago, up by 60% and 40%, respectively. Chartering activity remained high in West Africa in October for natural window fixtures and some prompt replacements, which pushed rates up, even breaking market ceiling rates.

Delays in the Mediterranean, mainly at the port of Trieste, also contributed to higher freight rates. Suezmax requirements were high in the Black Sea and the Mediterranean for crude and fuel oil loadings, while activities in both the North Sea and the Baltics varied, though remaining mostly limited. Suezmax market activity slowed towards the end of the month, while competition between owners increased. In October, freight rate gains were relatively dampened by the large number of VLCC fixtures, as an alternative.

The Aframax market followed the same pattern as other dirty tankers. Spot freight rates for Aframax operating on the Caribbean-to-US route registered their highest gains over other reported routes, standing at WS127 points, up by 52% from one month before, mainly on the back of delays in the US Gulf combined with a tighter position list and an increase in lighterage vessel demand. Spot freight rates on the Mediterranean-to-Mediterranean and Mediterranean-to- Northwest Europe routes increased by 10% and 12%, respectively, from the previous month to stand at WS92 points and WS84 points. Compared with one month earlier, the positive trend did not impact freight rates on the Indonesia-to-East route, which declined on average by 4% to stand at WS90 points. In other regions, Aframax freight rates firmed in the North Sea due to steady tonnage demand, while in the Mediterranean, tonnage supply remained less than demand, allowing ship owners to select their fixtures in view of the firming market. On average, Aframax spot freight rates gained 17% in October, compared with the previous month and 35% compared with the same month a year earlier.

Clean spot freight rates
Clean tanker spot freight rates gained 13% on average in October, compared with the previous month, mostly due to a firmer West-of-Suez market, as all reported routes reflected higher freight rates, though East-of-Suez rates remained at the same weak levels seen the previous month. Clean spot freight rates on the Mediterranean-to- Mediterranean and Mediterranean-to-Northwest Europe routes increased by 123% and 22%, respectively, in October. This increase was supported by sufficient activity and a lack of vessels for prompt loadings.

In the East, spot freight rates for tankers operating on the Middle East-to-East route dropped by WS1 point from the previous month, as demand remained stable in the clean tonnage market, particularly for long-range vessels (LRs). However, a continuous build of tonnage prevented freight rates from increasing. Similarly, freight rates on the Singapore-to-East route declined by a slight WS1 point from one month earlier to average WS115 in October, despite reported delays at Singapore.

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