Tanker Market - Febrauary 2016

Source: OPEC_RP160209 2/11/2016, Location: Europe

Freight rate for dirty tanker ship owners showed a continued increase in January. On average, dirty tanker freight rates rose by 3% from the previous month, influenced by higher freight rates achieved by the Suezmax class, which increased by 25% from the previous month. In January, vessel availability was the main influence on freight rates for all classes moving from one direction to another. The average spot freight rates for VLCCs were mixed and fluctuated in January, as they reached high levels at the beginning of the month before gradually dropping as the amount of activity fell. This reflected lower freight rates for fixtures to the East. Nevertheless, VLCC freight rates remained stable on average from those seen a month before. In contrast, Aframax experienced drops on different routes to the West, as a lack of sufficient loading requirements contributed to the drop in rates. Clean tanker freight rates increased from a month earlier to average WS156 points. This increase came as a result of weather port delays and tightening tonnage supply.

Spot fixtures
According to preliminary data, OPEC spot fixtures declined by 0.37 mb/d in January over the previous month to average 10.68 mb/d. This drop was driven mainly by a decline in outside Middle East fixtures, which dropped by 0.57 mb/d. Fixtures from Middle East-to-West also contributed to the drop as they declined 0.05 mb/d from the previous month.

Sailings and arrivals
OPEC sailings, as per preliminary data, remained above the level seen last month, increasing by 0.25 mb/d to average 23.9 mb/d. Compared with the same month a year ago, they were lower by 0.5%. Arrivals in North America and the Far East were up in January by 0.35 mb/d and 0.30 mb/d, from the previous month, to average 10.54 mb/d and 8.59 mb/d, respectively. Arrivals in Europe and West Asia went down during the same period by 0.71 mb/d and 0.38 mb/d, to average 11.28 mb/d and 4.48 mb/d, respectively. From an annual standpoint, arrivals in reported regions followed the same movement as those seen in the monthly comparison.

Spot freight rates
VLCC spot freight rates in January remained almost stable from one month before to average WS73 points. VLCC chartering activities slowed with the start of the New Year with rates dropping from peaks seen the month before, mainly to eastern destinations. Following that, earnings did encounter a significant drop as a result of increased vessels supply, where the availability of vessels was seen higher in the market as vessels returned from dry dock (in addition to new arrivals). The imbalance in the market was clearly affecting the Middle East and West African chartering markets. However, rates rebounded as the imbalance was gradually treated and firm orders for February loadings returned to the market. Nevertheless, tanker earnings in different regions remain at healthy levels in January, despite volatility.

Rates for tankers operating on the Middle East-to-East route saw the only drop among all other reported routes for VLCCs, dropping by WS10 points, or 11%, in January from the previous month to stand at WS79 points. Rates for tankers trading on the Middle East-to-West routes saw an increase of WS5 points, or 9%, from a month before to average WS58 points. The West Africa-to-East route also closed the month higher, edging up 4% to average WS83 points. In an annual comparison, all freight rates on reported routes from the Middle East-to-East, Middle East-to-West and West Africa-to- East showed gains at the levels seen last year by 15%, 48% and 25%, respectively.

Suezmax freight rates showed the highest gain in January from other dirty tanker vessels rising on average by 25% from the previous month. Unlike what was seen in the VLCC market, Suezmax had plenty of activity at the begging of the year and increased requirements, mostly seen to western destinations. The market in West Africa showed a firm trend supported by the steady flow of requirements and the continued delays at the Turkish straits. In the Middle East market, activity was quiet to some extent, however the balanced market prevented rates for dropping as well as not granting any worthwhile gains.

Rates for tankers operating on the West Africa-to-US route increased by 18% in January to stand at WS92 points, and rates on the Northwest Europe-to-US route gained 34% to stand at WS83 points. Freight rates on both reported routes were 4% and 13% higher, respectively, than those seen in the same month a year before.

Aframax registered the main freight rate drop in January, amid other dirty tanker vessel sizes, declining on average by 7%, despite the mixed performance seen on its different routes.

In January, Aframax spot freight rates were mixed, though mostly down from the previous month and year earlier, showing drops on most routes with the only exception on the Indonesia-to-East route which stood at WS126 points, increasing by 2% from one month earlier.

The Mediterranean market showed weakness in January as rates slipped on the back of limited requirements and the lack of firm tonnage orders. Both the Mediterranean and Black Sea added downward pressure on rates, with lowest levels in several months reached at times. Therefore, freight rates for tankers operating on the Mediterranean-to-Mediterranean and the Mediterranean-to-Northwest Europe routes dropped in January by 15% and 16%, to average WS102 points and WS96 points, respectively, each remaining 10% lower over the same month last year.

Rates in the North Sea and Baltic Sea were not affected dramatically from what was seen before, despite the ice restrictions regulation coming into effect in the middle of January. This was partially due to the loss of loading opportunities, as Primorsk ports have gone into a maintenance period. In the Caribbean, the tonnage supply was balanced as bad weather conditions reduced the amount of available vessels.

However, they somehow kept the drop in rates to a minimum, therefore the freight rates for tankers trading on the Caribbean-to-US route dropped only by a slight 1% to average WS122 points.

Clean spot freight rates
In the clean tanker market, spot freight rates turned positive on both sides of Suez. Freight rates strengthened on all reported routes in the East and West. Average rates went up by 27%, showing an average gain for the third month in a row.

Freight rates for several classes in the clean market showed an upward sentiment in January. In the long-range segment, the market had an active start and rates were seen higher mainly on the back of port delays and a tightening positions list. On the other hand, the medium-range market fluctuated as the amount of activity varied during the course of the month, making the availability of vessels the main influence on rates on both directions of Suez. The rates for tankers trading on the Singapore-to-East route and Middle East-to-East route showed gains in January, increasing by 35% and 23%, respectively, from the previous month. In the West, the rates for the Mediterranean-to- Mediterranean and the Mediterranean-to-Northwest Europe routes each went up by 25% and 26%, respectively, although they remained 17% below the highs reached last year. The Northwest Europe-to-US route edged up by 29% to average WS134 points, as rates were firming on gasoline tanker fixtures.

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