Tanker Market - February 2017

Source: OPEC_RP170209 2/13/2017, Location: Europe

Spot freight rates in January continued the recovery started in 4Q16, showing general improvements across all tanker sectors. This improved sentiment was seen on all reported routes and in various tanker segments.

Dirty tanker spot freight rates registered gains on all reported vessels, with the highest gains reflected on Aframax tankers. On average, VLCC spot freight rates increased by 6%, while spot freight rates for Suezmax went up by 4%. Aframax spot rates increased by 15%, while dirty tanker gains were driven by a firmer market in West Africa, mainly to eastern destinations – Middle East and Mediterranean – as well as delays due to congestion in the Turkish Straits and severe weather conditions.

The clean market showed higher monthly freight rates on all reported routes as registered mainly for medium range tankers, edging up by 40% on the East of Suez and by 16% in the West of Suez.

Spot fixtures
OPEC spot chartering declined by 0.6% in January compared to the previous month to reach 11.88 mb/d, according to preliminary data. Within the Middle East, spot chartering towards the east showed a decline of 2%, while towards the west it dropped by 7.9%. Middle East-to-East spot chartering ended the month at 5.58 mb/d less, while the Middle East-to-West route ended the month at 2.71 mb/d, lower from the 2.95 mb/d registered one month ago. On a y-o-y basis, OPEC spot chartering in January showed an increase of 12.4% compared to the same month a year ago, while global spot chartering declined in January by 3.4% compared to the previous month to stand at 16.19 mb/d. However, this was 12.4% higher compared to the same month a year ago.

Sailings and arrivals
Sailings from OPEC were 0.9% higher in January, standing at 24.28 mb/d, up from 24.07 mb/d in the previous month and remaining 2% higher than in the same month a year ago. Middle East sailings in January averaged 17.49 mb/d, down 0.3% from the previous month. Crude oil arrivals into North America increased by 2.6% in January over the previous month and into West Asia were up by 2.3%. Conversely, crude oil arrivals to Europe and the Far East were all lower m-o-m in January by 0.8% and 3.2%, respectively.

Spot freight rates
VLCC
The month of January started with slow activity in the chartering market where tonnage demand was limited for several classes, putting pressure on tanker earnings. Nevertheless, chartering activity resumed later mainly when third decade requirements came into the market. VLCC activity in West Africa kept at high levels mainly to the east, reducing the amount of access tonnage and supporting freight rates in that region. Therefore, average spot freight rates for tankers operating from West Africa-to-East showed the highest gains from the same class operating on the different routes, increasing by 8% from the previous month to average WS 84 points. Freight rates for VLCC trading on both Middle East-to-West and Middle East-to-East showed gains of 6% and 3%, respectively, in January from a month ago to stand at WS 53 points and WS 84 points, respectively. Generally, VLCC activity increased for February fixtures, showing an improved sentiment in the Middle East and other areas for old and modern types of vessels, although gains varied.

Suezmax
Suezmax spot freight rates increased by 4% on average in January over the previous month to stand at WS 89 points. The average monthly gains came despite a fairly slow start seen at the beginning of the month, which, combined with a balanced tonnage list, was not enough to support Suezmax freight rates, particularly in the east. However, a flow of inquiries came into the market, lifting activities in several areas, including West Africa, the Mediterranean and the North Sea, which resulted in a clear reduction in the tonnage list, providing support to freight rates. The escalating momentum pushed ship owners to hold their requirements as they were trying to prevent rates from escalating further. Suezmax rates in the Mediterranean continued to receive support from the delays in the Turkish Straits as the fog prolonged the total transit time, reducing spot vessel availability, mainly in the Mediterranean and Black Sea. While Suezmax class experiencing rate fluctuations in January in accordance with the activity in the market and the length of the tonnage list, average rates generally increased by 4% compared with the previous month as the rate for Suezmax operating on the West Africa-to-US route and NWE-to-US routes both increased by 2% and 7%, respectively, from a month earlier.

Aframax
Aframax spot freight rates increased in January, up by 15% from a month before, benefiting from the cold weather as higher fixtures on the ice class ships became a main requirement for loading in some ports in the Baltic Sea.

Difficult weather conditions caused further delays in the Turkish Straits and in several ports, leading to a sudden jump in Aframax freight rates in the Mediterranean and Black Sea. Freight rates in the Mediterranean declined afterwards, despite continued severe weather conditions and the closure of the Turkish Straits; however, lower volumes of cargoes in the market combined with tonnage build-up, along with competition from larger vessels, to push down freight rates from the high level they reached earlier.

Thus, on average, spot freight rates for tanker trading on the Mediterranean-to-Mediterranean and Mediterranean-to-NWE increased by 23% and 21%, respectively, from a month ago. In the Caribbean, Aframax spot freight rates registered a bounce of 14% from a month before for tankers operating on the Caribbean-to-US route to stand at WS 156 points. Those gains were driven by delays caused by foggy weather, as well as lighterage requirements. On the other hand, average freight rate on the Indonesiato-East route exhibited the smallest increase amid other routes, growing by WS 1 point from a month ago.

Clean spot freight rates
As seen in the dirty segment of the market, clean tanker spot freight rates shared the tanker market’s upward momentum, showing a generally improved sentiment in January from the previous month, supported mainly by winter demand and severe weather conditions. The gains in the clean tanker segment were mostly registered for medium range classes while other vessels in the product market did not share the same fortune.

In the East of Suez, clean tanker spot freight rates experienced an increase of 40% compared with the previous month. Clean spot freight rates for tankers moving between the Middle East-to-East and Singapore-to-East routes increased by 40% each to stand at WS 124 points and WS 174 points, respectively. Spot freight rates for tankers operating on the NWE-to-US East Coast (USEC) route increased by 41% to average WS 171 points in January.

In the Mediterranean, clean spot freight rates increased in January compared with the previous month, supported by bad weather conditions as well as delays in the Turkish Straits. Clean spot freight rates for tankers trading on the Mediterranean-to-Mediterranean route rose by 6% in January compared with the previous month to average WS 183 points, while clean spot freight rates for tankers operating on the Mediterranean-to-NWE route gained 8% to stand at WS 198 points.




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