The Saudi-led blockade against Qatar has raised concerns about multi-port loadings of Doha’s crude oil grades on very large crude carriers, with charterer interest diverted to smaller tankers such as aframaxes and suezmaxes, ship brokers said.
However, enquiries for smaller tankers in the Middle East are yet to become fixtures. Benchmark aframax and suezmax spot rates on the Baltic Exchange are down by 40% to 50% on the week as the expected rebound in the West African market is yet to materialise.
All ties severed:
On Monday, a group of Arab states led by Saudi Arabia, the United Arab Emirates, Egypt and Bahrain severed ties with Qatar, effectively bringing all road, air and sea trade to a screeching halt.
As their ports barred not just Qatar-flagged and owned vessels, but also any other ships that were coming from or heading to the small peninsular country, crude traders and dirty tanker brokers have raised concerns about disruptions to oil cargo loading schedules. This is because VLCCs typically pick up crude stems from several different oil terminals in a single run.
Data showed that a total of 121 VLCC multi-loads were conducted in the Middle East basin in the January-May period of 2017. In the full calendar year 2016, a total of 386 VLCC multi-loads were conducted in the area, covering the ports of Ras Tanura, Halul Island Terminal, Das Island, Zirku Island, Al Shaheen, Jebel Dhanna, Mina al Ahmadi and Fujairah.
On June 6, oil pricing agency Platts initiated a review of the deliverability of crude oil loading from Qatari ports and put the nominations of Al-Shaheen crude loading from Qatar on hold in its oil pricing process, indicating the seriousness of the Qatar blockade.
According to Platts, market participants have flagged the restrictions on vessels calling into Qatar, and associated uncertainty could impact the inherent value of crude loading from Qatar. Qatar’s oil company Qatar International Petroleum Marketing, or Tasweeq, is a major supplier of condensates into the oil market.
Uncertainty on the cards:
“A lot of uncertainty is currently surrounding the process,” online brokerage Ocean Freight Exchange said. Some preemptive measures were being taken, such as Total’s swap of the 297,345 dwt DS Venture for the 157,850 dwt Eagle San Juan and the 157,737 dwt Nordic Star for separate voyages from Jebel Dhanna and Al Shaheen to East Asia, respectively, OFE said.
The exchange said in a report that charterers were likely to turn to smaller tankers such as suezmaxes and aframaxes with issues related to multi-loading VLCC operations involving Qatar, and that another option worth exploring would be ship-to-ship transfers.
Aframax and Suezmax rates
Weighted Aframax and Suezmax TCE rates
June 7, 2017
Another shipbroker said charterers were taking precautions and enquiring about the availability of aframaxes if the situation in the Middle East were to deteriorate rapidly, which would put a floor on rates for the coming weeks.
Qatar is a member of the Organisation of the Petroleum Exporting Countries but is the second-smallest crude oil producer among the 12-member group, with its liquefied natural gas exports far outpacing its crude export volumes.
In the longer term, a sustained blockade could hurt the development of its oil and gas reserves.
Baltic Exchange assessments
- Aframax avg TCE: six contributing routes across the globe. Suezmax avg TCE: two contributing routes, including TD6: Black Sea-Mediterranean and TD20: West Africa-northwest Europe
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Source: Lloyds List