After gains over the past few months, freight rates in the tanker market declined
month-on-month in February. The lowest freight rates were registered for VLCCs
and Suezmax as both classes showed a similar drop of 13% m-o-m, mainly for
tankers trading to the eastern destinations, which were affected by the holiday
season in the East. Even with the drops in VLCC and Suezmax freight rates, dirty
tanker average freight rates showed a slight WS1 point rise compared to the
month before, due mainly to the enhanced performance of Aframax, which
showed a freight rate increase of 11% from a month ago as a result of a firmer
Caribbean market, tightening vessel availability and port delays. Despite the
bearish sentiment seen in the tanker market during February, freight rates
remain at healthy levels, showing increases on an annual basis for all selected
classes and routes.
According to preliminary data, global fixtures increased by 6% in February compared
with the previous month. OPEC spot fixtures were up by 6.3% or 0.73 mb/d to
average 13.14 mb/d. Fixtures from the Middle East-to-East route averaged 6.67 mb/d
in February, increasing by 0.46 mb/d from one month ago, while those from the
Middle East-to-West route averaged 2.78 mb/d. Outside the Middle East, fixtures
averaged 3.69 mb/d, showing a decline of 0.42 mb/d. Compared with the same period
a year earlier, global fixtures indicated growth of 1.1% in February.
Sailings and arrivals
Preliminary data show that OPEC sailings increased in February by 2%, averaging
24.54 mb/d, an increase of 5% compared to the same month a year ago. Middle East
sailings were up from the previous month by 2.7% and up by 3.8% from a year earlier.
February arrivals were mixed, registering increases in the Far East and Europe of 3.5%
and 2.6%, respectively, from one month earlier, while arrivals to North America and
West Asia dropped by 3.3% and 1.8%, respectively, to average 10.2 mb/d and
Spot freight rates
The VLCC class saw limited activity at the beginning and end of the month with no
strong flows of cargoes seen for March requirements. In February, the market was
balanced, however freight rates were negatively affected by a drop in Asian
requirements, due to the regional holiday season. The lack of activity seen in the month
of February could have lent further support to the freight rate decline if it had not been
halted by delays in the Middle East, disturbing weather conditions and port congestion.
On the other hand, tanker owners tried to cap the drop in freight rates by rejecting low
offers. Average spot freight rates for VLCCs declined by 12% in February from the
previous month to average WS51 points. This decline was mainly the result of a drop in
VLCC rates on all reported routes. Freight rates for tankers operating on the Middle
East-to-East route declined by 13% to average WS60 points. Similarly, rates reported
for tankers trading on the West Africa-to-East route declined by 13% to average
WS58 points, while freight rates registered for tankers trading on the Middle East-to-
West route saw smaller drops, declining by 8% to average WS36 points. Despite the
m-o-m drop, VLCC freight rates on all reported routes were higher when compared to
the same month in 2014.
In the Suezmax market, spot freight rates followed the same trend seen with the
VLCCs in February, declining on average by 7% from a month before to stand at
WS76 points. Although the Suezmax market witnessed upward momentum at the
beginning of the month, supported by higher freight rates registered for Aframax
tankers in the Mediterranean Sea, activity slowed down at a later stage, mainly for the
West African market along with February programme completion. The arrival of March
requirements did not grant any freight rate gains to the West African Suezmax market
as the tonnage availability remained dominant.
Activity and freight rates for Suezmax in the Black Sea were generally weak in
February, remaining stable at best, despite delays and bad weather in the straits.
Suezmax freight rates dropped further when Aframax rates dropped, making the partial
cargo business not feasible any more. Tankers operating on the West Africa-to-US
route decreased by 7% to average WS82 points.
Despite the average freight rate drop in West Africa, rates would have been even lower
if they had not been corrected by the increase in rates seen towards the end of the
month in the Caribbean for Aframax and Suezmax. Rates on the Northwest Europe-to-
US route fell by 6% in February from the previous month to average WS70 points. In an
annual comparison, freight rates on both routes were higher than the same month last
year by 38% and 23%, respectively.
Aframax was the only class in the dirty sector that ended February registering higher
freight rates on average, increasing by 11% in February over the previous month.
Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe Aframax
rates each rose by 13% to average WS128 points and WS120 points, respectively.
Freight rates for Ice Class Vessels continued their upward momentum as the market
firmed in the Baltics and North Sea supported also by the loading requirements of
Primorsk and Ust Luga. Bad weather and long transit delays at the Turkish Straits
continued to support freight rates early in the month before the effect was dampened
by increased vessel availability. The rates between the Caribbean and the US East
Coast (USEC) were up by 20% from a month before to stand at WS 165 points,
marking the highest increase of all the other reported routes. This healthy increase
came on the back of a tightening positions list, bad weather and delays due to lack of
ullage capacity. All factors together supported freights in the region. The Indonesia-to- East route dropped by 5% in February from the month before to average WS105
Clean spot freight rates
In the clean tanker market, spot freight rates weakened on all reported routes in
February. Activity in the clean tanker market was affected by the holiday season, as
was the case with the dirty tanker market.
In February, clean tanker average rates declined by 16% as both East and West of
Suez fixtures dropped by 7% and 20%, respectively. The limited activity led to an
increase in vessel surpluses, which was the main factor behind the freight rate drop.
The largest decline was registered in the Mediterranean Sea, where both reported
routes dropped by almost 23% for each.
In the West, freight rates showed a drop from last month as freight rates registered for
tankers trading on Northwest Europe-to-US route declined by 9% to average
WS128 points. Average freight rates dropped despite gasoline arbitrage and bad
weather in the Atlantic, which led to freight gains at end of the month.
The situation in the east did not differ much as lower product trade during the holidays
was mainly seen to dampen tonnage demand. The rate for tankers trading on the
Singapore-to-East route dropped by 3%, and the Middle East-to-East route rate
showed a decline of 10% as both stood at WS116 points and WS108 points,
respectively, partially on the back of limited naphtha shipments.