Tanker Market - Januray 2016

Source: OPEC_RP160109 1/18/2016, Location: Europe

In December, dirty tanker spot freight rates were mixed, with VLCC rates showing gains following a decline encountered the previous month, while other vessels in the dirty class did not share this positive trend. Spot freight rates for both Suezmax and Aframax tankers were down from a month earlier. In the VLCC sector, freight rates recovered in December from a drop the month before, showing gains on all reported routes, reaching occasional highs not seen for some time. On average, VLCC freight rates rose by 30% as a result of steady tonnage demand, which supported VLCC loading to many destinations. The VLCC market saw strong activity during December, however this did not have a spillover effect on smaller vessels in the dirty sector. On the contrary, Suezmax and Aframax rates registered drops of 7% and 2%, respectively, as the amount of tonnage demand remained limited in several areas.

Clean tanker spot freight rates increased by 6%, on average, in December compared with the previous month, as a result of gains registered for tankers operating both East and West of Suez, up by 8% and 5%, respectively. The clean tanker market remained mostly balanced, despite higher monthly rates. In an annual comparison, average clean tanker freight rates were significantly lower than the year before.

Spot fixtures
Global fixtures dropped by 3.5% in December, compared with a month earlier. OPEC spot fixtures also declined by 0.56 mb/d, or 4.8%, to average 11.10 mb/d, according to preliminary data. Lower fixtures were registered in all regions, with the only exception outside the Middle East, where chartering activities increased by 0.42 mb/d. Fixtures from the Middle East to both east- and west-bound destinations dropped starting in November by 0.4 mb/d and 0.58 mb/d, respectively. Global fixtures were 4.6% lower than in December 2014.

Sailings and arrivals
Preliminary data shows that OPEC sailings were down by 0.53 mb/d or 2.2% in December to average 23.67 mb/d, though they remained at 0.32 mb/d, 1.4% higher than the same month a year ago. Port arrivals were mixed; in North America and Europe they dropped from the previous month, while in the Far East and West Asia they were higher by 0.08 mb/d and 0.05 mb/d, respectively, to average 8.30 mb/d and 4.87 mb/d.

Spot freight rates
VLCC
In the VLCC sector, the market reversed the freight rate drops from the month before, registering gains of 30% m-o-m and 32% from the previous year. The VLCC market saw strong demand starting from the beginning of December, as cargo flows were steady, leading to a firmer market in several areas.

Spot freight rates for tankers operating on the Middle East-to-East route registered the highest increase among all reported routes. VLCC spot freight rates for tankers operating on the Middle East-to-East route edged up by WS24, or 37%, in December, compared with the month before. Tonnage requirements from Asian charterers affected VLCC requirements in both the Middle East and West African markets.

VLCC spot freight rates for tankers operating on the West Africa-to-East route increased in December from a month earlier to average WS80 points, up by WS12 points or 17% from the previous month. Tonnage requirements from the West were also kept at high levels, supported by winter requirements. VLCC spot freight rates on the Middle East-to-West long-haul route in December averaged WS53, higher by 40% from the previous month and remarkably up by 50% from the same month the previous year.

Suezmax
Unlike the development of VLCC freight rates in December, Suezmax spot rates dropped from the previous month, losing 7% on average. Despite a small pre-holiday rush, which occasionally supported rates, limited activity was the main reason behind a drop, notwithstanding delays seen in several regions and prolonged transit time in the Black Sea. Moreover, east-heading fuel oil cargo requirements were not enough to significantly support freight rates.

Freight rates for Suezmax operating on the West Africa-to-US route declined by 8%, mainly as a result of low tonnage requirements. Rates for tankers operating on the Northwest Europe (NWE)-to-US route decreased by 6%. The Suezmax market in the Caribbean remained mostly quiet, with limited fixtures.

Aframax
Similar to what was seen with Suezmax, Aframax spot freight rates showed a decline in December on average from one month before, although the average drop remained below what was seen in the Suezmax class, as the tonnage list was mostly balanced. Aframax freight rates declined by WS3 points, on average, as a result of a mixed performance on different routes.

Delays in the North Sea and Baltic regions did not affect rates significantly, while delays at Black Sea and Turkish straits closure supported freight rates, in combination with steady activity in the Mediterranean. Therefore, freight rates in both directions – Mediterranean-to-Mediterranean and Mediterranean-to-NWE – increased by 7% each, as ships with confirmed itineraries limited availability.

Slow activity in the Caribbean market led to increased tonnage buildup, which affected the balance of vessel supply and demand in the area. High vessel availability occurred partially on the back of prompt discharge following ullage delays. As a result, the Caribbean-to-US rate dropped by 27% from the previous month to average WS125 points, showing a decline of 15% from the same month a year before.

Aframax freight rates in the East were higher, showing gains on the Indonesia-to-the- East route by 18% to average WS123 points.

Clean spot freight rates
In the clean sector, spot freight rates for tankers operating on several routes registered gains in December in different vessel classes. The East-of-Suez Middle East market was busy with high demand for long-range and mid-range classes. In the West of Suez, tightening vessel availability at the beginning of the month supported freight rates, mainly in the Mediterranean. The clean tanker market lost its firming trend afterwards, as cargo requirements lessened and chartering orders dropped, partially on the back of a warmer winter in the West.

On average, rates for tankers operating on the Middle East-to-East route rose by 21% compared with the previous month and rates for the Singapore-to-East route remained flat from one month earlier to average WS109 points in December.

In the West of Suez, rates seen on the NWE-to-US route registered the highest drop among reported routes, down by 8% to average WS112 points. The Mediterranean-to- Mediterranean and Mediterranean-to-NWE routes saw gains of 12% and 11%, respectively.


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