The OPEC + strong production cut bolstered the crude prices by almost 80% and slashed the amount of crude oil movements around the world, says Viswa Lab in its latest technical update.
Drop in crude tanker charter rate
The charter rate for crude oil tankers dropped more than 70% from their March 2020 peaks.
Fluctuation in rates
In March, when Saudi Arabia was exporting more oil:
- VLCC’s charter rates went up to $250,000 a day.
- The same charter for a VLCC dropped down to $59,000 a day and even moving downwards towards $50,000 a day.
What happened?
The OPEC + countries strong production cut bolstered the crude prices by almost 80%. Worldwide the crude production is set to fall to a low of 88 million barrels a day.
Crude oil movement
These production cuts slashed the amount of crude oil movements around the world and daily shipments have dropped over 15% in May.
Shale producers
The shale producers from the US have also reduced production.
The domino effect on crude price
The cut in oil productions leading to a cut in oil movements by ships has had the effect of bringing down the charter rates.
VLCCs turned storage tanks
Many VLCC’s that had turned into storage tanks will slowly come back into service.
Usage of stored oil
Till a major portion of the stored oil is used up, the crude prices are not likely to go up to the crude prices of $35 to $38 per barrel.
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Source: Viswa group
