Tanker Market - June 2015

Source: OPEC_RP150609 6/11/2015, Location: Europe

Dirty tanker market sentiment showed an improvement in May compared to a month ago in all classes unlike the usual trend at this time of the year. The higher freight rates were seen on many routes, especially for larger vessels. In May, VLCC spot freight rates experienced an average gain of 15% over the same month in 2014, driven by high tonnage demand and a firmer market in several regions, mainly Middle East and West Africa. Similarly, Suezmax and Aframax tankers met with higher demand by eastern and western charterers. The increase in chartering activities, combined with tighter tonnage supply, led to an increase in rates seen on a monthly basis and on a larger-scale compared to previous year’s levels.

Clean spot freight rates showed a mixed performance in May. Rates reported a decline, averaging 12% from the previous month, as the market was affected by excess tonnage availability, while the amount of market activity remained insufficient to alleviate the imbalance.

Spot fixtures
In May, OPEC spot fixtures increased by 1.1 mb/d, or 10%, compared with the previous month to stand at 12.21 mb/d. Moreover, all chartering activities worldwide showed an increase from the month before with no exception. Fixtures from the Middle East-to- East and Middle East-to-West routes experienced an increase of 5.9% and 25.3%, respectively. Generally, global oil spot fixtures were up in May by 0.93 mb/d to average 17.26 mb/d compared with the previous month.

Sailings and arrivals
OPEC sailings increased by 0.48 mb/d, or 2.1%, in May from a month ago and by 0.36 mb/d from a year before. Sailings from the Middle East also went up from last month by 0.48 mb/d and from last year by 0.35 mb/d. According to preliminary data, arrivals at main importing regions in North America, Europe and West Asian ports showed an increase from a month earlier as arrivals in the three regions went up by 1%, 2.9% and 0.3%, respectively, from last month. In contrast, vessels arrivals in the Far East showed a decline from last month by 2.4%.

Spot freight rates
VLCC spot freight rates increased on all reported routes in May from the previous month, with freight rates on Middle East-to-West route experiencing the largest gains of 28% to stand at WS43 points.

Spot freight rates registered on the Middle East-to-East route showed a lesser gain, increasing by 13% to average WS70 points, while the West Africa-to-East route showed an increase of 10% from the previous month to average WS66 points. VLCC freight rates increased in May, despite the quiet beginning seen early in the month as the position list was balanced, and the level of fixtures and inquiries kept weak. However weather delays in Asian ports increased chartering activities while the tonnage supply was tightening. The first decade fixtures for the month of June brought a rush of activity to the market, mainly in the Middle East, which resulted in pushing freight rates sharply to unusual levels for this time of the year. The general improvement seen on the VLCC market was registered mainly towards the second half of the month. Afterwards, the charterer’s trials to halt a further increase in rates paid off and freight rates stabilized as VLCC activities and rates eased off towards the end of the month. From an annual perspective, VLCC freight rates in May showed a remarkable gain from the same month a year ago.

Similarly, Suezmax freight rates followed the VLCC freight rates trend in May showing worthwhile gains on both an annual and monthly basis. Equally, Suezmax had a slow start in the beginning of the month with freight rates softening, mainly in West Africa. Low rates and activities were also noticeably seen in the Black Sea and Asia in the beginning of May. The low freight rates came on the back of ample tonnage availability even for prompt loadings. Similar to what was seen in the VLCC sector, Suezmax freight rates improved afterwards as the position list started to tighten gradually, subsequently leading to significantly higher rates. The firmer Suezmax market in West Africa had an influencing effect on rates in the Mediterranean/Black Sea. In May, Suezmax freight rates were supported by rising rates for both VLCC and Aframax. Consequently, freight rates for tankers operating on the West Africa-to-US route went up by 28% to average WS93 points, while rates for operations on the Northwest Europe-to-US route saw lesser gains, up by 18% to average WS75 points.

Aframax freight rates were mixed in May. The most reported routes showed an increase in freight rates from a month before. The greatest increase was seen on the Indonesia-to-East route which went up by 17% from last month to average WS116 points. Generally, the Aframax market was strong in May, with higher freight rates and activities exhibited on many routes during the month, despite fluctuating tonnage demand. In the Mediterranean, freight rates increased as activities remained healthy and relatively stable. Port delays earlier in the month and bad weather conditions partially supported freight rates. Therefore, freight rates for tankers operating on both Mediterranean-to-Northwest Europe and Mediterranean-to-Mediterranean routes rose by 10% and 9%, respectively, from April, to average WS107 and WS115 points. This was also affected by requirements for replacements and a firmer market for the North Sea and Baltics.

On the contrary, the only negative freight rate performance in the Aframax class was registered on the Caribbean-to-US route, where freight rates dropped by 21% from the previous month to stand at WS111 points.

Clean spot freight rates
Clean tanker market sentiment was weak in May. On average, clean spot tanker freight rates dropped by 12% from the month before to stand at WS143 points.

In the West of Suez, freight rates dropped on average, despite higher freight rates registered by medium-range tankers operating on the Northwest Europe-to-US East Coast, which went up by 13% to average WS161 points. The main driver behind the freight rates drop in the West was lower freight rates in the Mediterranean, as waning activities during the month kept dragging rates down, reflecting a decline of 30% and 28%, respectively, on both Mediterranean-to-Mediterranean and Mediterranean-to- Northwest Europe.

On the other hand, East of Suez average clean spot freight rates increased by a slight WS2 points on average, or 2%, mainly on the back of improved performance of tankers trading on the Middle East-to-East routes which increased by 6% from a month before.

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