Freight rates for very large crude carriers (VLCCs), which hit a new nine-month high this week, are on course to soften amid a weaker cargo market as owners wait for more charters to be released from the Middle East and labour unrest affects loading programmes from West Africa.
“I think a lot of owners have started to give up now. It’s way too quiet – a lot of owners expected this week to be really busy but it has been dead quiet,” a European supertanker broker said on Friday. “Owners are sitting on tonnage but there is no cargo,” the broker added. Around 34 cargoes have been fixed for loading in the Middle East in the first 10 days in January, according to data on the Reuters Eikon terminal. So far just nine Middle East cargoes have been contracted to loading in the second decade period between January 11-20.
“The market is quite thin with the oil production cuts,” the broker added. Members of the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec oil producers agreed earlier this week to cut output by almost 1.8 million bpd from January 1.
Cargo volumes from West Africa have also fallen as a result of strike action by workers at the ExxonMobil fields in Nigeria with no sign of February loading programmes for the Qua Iboe, Erha, Yoho or Usan fields. “We should some more cargoes coming out of West Africa but the market is sinking,” the European broker said.
Increased tonnage supply from new vessel deliveries, ships returning to sea from maintenance and repair and vessels coming free after completing current charters are expected to weigh on freight rates, brokers said. Moves by the United States to sell some of its crude held in its strategic petroleum reserve starting next month is also likely to adversely affect the tanker market. “To the extent that refiners would otherwise have imported these barrels, the impact on the tanker market will be a small negative, even though the volumes (7-8 million barrels) are relatively small,” New York-based tanker broker Poten & Partners said in a note on Thursday.
VLCC rates from the Middle East to Japan were around 90 on the Worldscale measure on Thursday. That was up from W88.5 the same day last week, but down from around W92.50 on December 20, the highest since March 16 and equivalent to daily earnings of $69,468, data on the Thomson Reuters Eikon terminal showed.
Rates from West Africa to China slipped to below W82 on Thursday from W83 a week ago. Rates climbed to W84.25 on December 19, the highest since March 16. Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia dropped to W102.25 on Thursday from W115 a week earlier on reduced chartering activity, brokers said.
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Source: Reuters
