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Tanker Market On a High Note

Saturday, 17 November 2018 | 00:00

Fortunes have improved in the tanker market as of late, as per the latest monthly OPEC report. In October, tanker spot freight rates for dirty vessels increased considerably, with gains being registered across all classes trading on all major routes. As the market approaches the winter season, tanker market spot freight rates saw notable improvements following a year of accumulative losses. On average, dirty tanker spot rates rose by 28% in October from a month earlier.

Rate developments in October showed Aframax spot freight rates achieved the strongest growth compared with the larger classes, rising by WS25 points, supported by healthy tonnage demand on the main trading routes. Similarly, in the dirty segment, VLCC and Suezmax average spot freight rates increased by WS21 points and WS19 points, respectively, over a month earlier. These gains were mostly driven by higher seasonal tonnage demand, as well as increased transit and port delays in different regions, including the Caribbean, the Middle East and the Far East. In October, dirty tanker spot freight rates on most of the routes remained well above the rates of the same months a year earlier.

Clean tanker freight rates increased on almost all reported routes in October, with average spot rates rising for the East and West of Suez routes by 6% and 18%, respectively. The clean tanker market was mostly uneventful in October, while vessel oversupply persisted. Despite higher monthly rates, clean tanker rates in October remained below those registered the same month a year ago.

Spot fixtures

In October, OPEC spot fixtures dropped 3.9% from the previous month to average 14.33 mb/d, according to preliminary data. The drop came on the back of lower spot fixtures on the Middle East-to-East and Middle East-to-West routes, which went down by 0.37 mb/d m-o-m each in October to average 7.79 mb/d and 1.62 mb/d, respectively. On the other hand, fixtures outside of the Middle East were up by 0.14 mb/d, m-o-m.

Sailings and arrivals

OPEC sailings dropped by 0.22 mb/d, or 0.9%, m-o-m in October to stand at 24.71 mb/d. Middle East sailings declined as well, down by 0.27 mb/d over the previous month, to average 17.97 mb/d. Vessel arrivals went up in October at European and West Asian ports, increasing by 2.5% and 3.0%, respectively, over the previous month, while arrivals at North American ports showed a decline of 4.3% and Far Eastern ports stayed flat from the month before.

Dirty tanker freight rates

Very large crude carriers (VLCCs)
Following the usual seasonal trend, VLCC spot freight rates showed notable gains in October from the previous month across all reported routes. On average, VLCC spot freight rates increased considerably by 48% m-o-m to stand at WS66 points, up by 20% y-o-y. This long-awaited increase in rates was registered on all major trading routes mainly due to eastern destinations where freight rates registered for tankers operating on the Middle East-to-East route showed increases of WS28 points from a month before to average WS83 points. At the same time, bullish sentiment was spreading into other areas.

The chartering market in West Africa (WAF) and the Middle East showed higher rates. Gains for VLCCs were driven by storms and weather delays in the Far East, discharge uncertainties at eastern ports, increases in chartering activities and replacement vessels. Therefore, VLCC spot freight rates on the Middle East-to-East route and rates on the WAF-to-East route rose by WS28 points and WS25 points to average WS83 points and WS81 points, respectively, showing increases of 51% and 45%, in October. VLCC Middle East-to-West spot freight rates recovered as well, though to a lesser extent, up by WS11 points, or 47%, m-o-m in October to stand at WS33 points.

Suezmax spot freight rates rose further in October from one month before, increasing by WS19 points, or 29%. In West Africa, Suezmax rates reached a level not seen in some time supported by higher activities and healthy tonnage demand. In the Middle East, bad weather conditions and prompt tonnage replacements drove freight rates to levels not seen for a while. Suezmax freight rates in October were also supported by arbitrage opportunities and lightering operations. Therefore, rates registered for tankers trading on the Northwest Europe (NWE)-to-US Gulf Coast (USGC) route gained 21% to stand at WS67 points. Suezmax spot freight rates for tankers operating on the West Africa-to-USGC route went up by 37% from a month before to stand at WS94 points.

In general, Aframax spot freight rates rose in October, although the levels of gains varied on different routes. Average rates rose in October, up by 21% from one month before, as a result of higher rates seen on all reported routes, although the larger increases remained on the Caribbean-to-US East Coast (USEC) route, which showed an increase of WS37 points from one month earlier. Scarcity of available vessels combined with weather delays in the Caribbean supported Aframax spot rates on that route. Aframax spot freight rate gains were also driven by higher rates in the Mediterranean on the back of tightening Aframax availability and increased transit delays in the Turkish Straits

Spot freight rates on the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes rose by 21% and 19%, respectively, from the previous month to stand at WS129 and WS120 points. Similarly, the market in the east showed higher rates as Aframax spot rates went up on the Indonesia-to-East route by 20% m-o-m to stand at WS123 points. Aframax also benefited from a reduction in VLCC loading in the North Sea, which were replaced by smaller ships in the market.

Clean tanker freight rates

Clean tanker spot freight rates increased by 13% on average in October compared with the previous month. The gains were registered on fixtures in both directions of Suez, with rates edging up on most selected routes.

In the east, spot freight rates for tankers operating on the Middle East-to-East route rose by WS14 points, while rates on the Singapore-to-East route remained flat. Spot freight rates on both routes averaged WS124 points and WS123 points, respectively, from the previous month. Clean spot freight rates on the NWE-to-USEC route rose by WS4 points to stand at WS25 points. The Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes showed the highest increases on the back of enhanced activities in the area and as the Black Sea market firmed. Spot rates went up on both routes by WS30 points and WS32 points, respectively, to stand at WS150 and WS162 points.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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