Tanker Market- October 2015

Source: OPEC_RP151009 10/17/2015, Location: Europe

In general, improved sentiment was seen in September in the tanker market, more obviously for larger vessels. Tanker freight rates registered an increase of 27% and 5%, for VLCC and Suezmax classes, respectively, while Aframax closed the month with freight rates down from the previous month by 4%. The VLCC market – which experienced the highest gains of all reported classes in the dirty tanker segment in September – was volatile, as its activity levels fluctuated, thus leading to higher rates, mainly in the Middle East and West Africa. VLCC freight rates in September also benefitted from occasional tight tonnage supply and delays in Asian ports. Suezmax classes experienced lower gains as demand remained limited in light of sufficient tanker availability. Aframax freight rates dropped on average; this was driven by low tonnage demand in the Mediterranean. Clean spot freight rates were mostly weak in September, declining on the back of limited requirements and low market activity in both the East and West of Suez, despite exceptions in the West which somewhat offset losses on other routes.

Spot fixtures
Chartering activity declined during September in all regions; total spot fixtures dropped by 4.9% m-o-m, while estimated OPEC spot fixtures fell by 9.7%, compared with the previous month, to average 11.03 mb/d. Losses in fixtures were seen in all reported regions, as those from the Middle East-to-West and outside the Middle East declined by 12.3% and 6.4%, respectively, while on the Middle East-to-East route they dropped by 10.5% from the previous month, to average 5.14 mb/d.

Sailings and arrivals
OPEC sailings dropped by 0.48 mb/d in September from the previous month to stand at 23.64 mb/d. Likewise sailings from the Middle East dropped by 0.46 mb/d. In addition, arrivals showed a drop in September at all ports, with the exception of West Asian ports, which showed higher arrivals from a month before by 0.19 mb/d. Arrivals0.08 mb/d and 0.30 mb/d, respectively.

Spot freight rates
At the beginning of the month, the VLCC market was seen as very volatile, following a drop in freight rates encountered the previous month. The market witnessed an upward correction in rates as those for Middle East loadings increased, as a result of higher activity in the region and in part because of storage requirements. Rates in the Middle East and West Africa continued their gradual increase, supported by a tighter tonnage list for second- and third-decade loadings. In addition, discharge delays in some Asian ports reduced the amount of available tonnage due to uncertain schedules. Steady fixture levels supported VLCC freight rates in September, which showed an increase of 40% for tankers operating on the Middle East-to-East route to stand at WS54 points. Middle East-to-West spot freight rates encountered lower gains, up by 24%, from the previous month, to average WS32 points. VLCC freight rates in West Africa edged up as well; they were influenced by freight rate movements in the Middle East. The end of the month witnessed steady tonnage demand for tankers trading on the West Africa-to- East route, with tankers operating at WS55 points in September, higher by 18% from the previous month, and 23% higher than the same month a year earlier.

Despite Suezmax demand being described as scarce at the beginning of September and the tonnage list being well-populated at that point, Suezmax activity increased ahead of the second half of the month, mainly in West Africa, and for the remaining third decade of September loadings. However, the effect was limited, as vessel supply remained largely sufficient for eastern destinations, despite tonnage requirements for fuel oil loadings and simultaneous firming of the VLCC market. On average, Suezmax spot freight rates on the West Africa-to-East route closed the month at the same level seen the previous month to stand at WS66 points. Freight rates registered for tankers operating on the West Africa-to-US Gulf route showed an increase of 10% from the month before to stand at WS55 points. Gains on the route came mainly on the back of several replacements undertaken with tight dates.

Aframax freight rates took a different direction on various reported routes in September. In general, Aframax freight rates dropped by 6% from the previous month, missing the enhanced price tendency of the bigger vessels. The North Sea and Baltic markets often remained flat, as even an occasional increase in activity was not enough to push rates up significantly, with vessel availability remaining in surplus. Scheduled maintenance in Primorsk added to the loss of cargoes there. Aframax market movements in the Mediterranean were slow in September and enquiries scarce; even during busier days of the month, freight rates stayed below levels seen a month earlier. Aframax freight rates on the Indonesia-to-East route showed no change from the previous month, averaging WS97 points, while spot freight rates for the Mediterraneanto- Mediterranean and Mediterranean-to-Northwest Europe routes dropped by 2% and 23%, respectively.

On the other hand, Caribbean-to-US East Coast (USEC) spot freight rates showed the only gains seen in the market among all routes, standing at WS109 points, up by 22% compared with a month earlier and a 31% enhancement over the previous year. The route proved to be one of the busiest this month in combination with occasionally limited vessel offerings, which enabled ship owners to push for higher fixture rates.

Clean spot freight rates
Clean tanker market sentiment saw mixed movement in September. On average, spot freight rates for vessels trading on East-of-Suez routes dropped by 20% from the previous month, while showing a slight gain of 2% in the West of Suez. September was a slow month for clean tankers of different sizes. The clean tanker market reported low activity in September, particularly in the East, where spot freight rates on the Middle East-to-East and Singapore-to-East routes dropped by 29% and 13% to stand at WS107 points and WS146 points, respectively, as a result of thin trade. West-of-Suez freight rates for medium-range (MR) vessels improved towards the month’s end as the market was revived by an influx of inquiries and thinner availability. This led to spot freight rate increases for vessels operating on the Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes in September by 10% and 9% from the previous month, to average WS137 and WS147 points, respectively.

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