Despite a seemingly ample supply of available vessels (a “populated tonnage list”), shipowners are demonstrating a strong resolve to prevent a significant downturn in the market. They appear determined to avoid a scenario where an oversupply of ships leads to further, substantial rate erosion.
VLCC Market
The VLCC (Very Large Crude Carrier) market is characterized by a fairly populated tonnage list, yet owners are demonstrating a strong resolve to prevent rates from slipping. Charterers are actively trying to keep a lid on rates by working discreetly and fixing ships quietly. Currently, the market is focused on end-July dates, with approximately 20-25 cargoes still needing to be fixed before August dates become the primary focus.
There has been some overnight activity in the West. If a significant number of owners decide to ballast their vessels West, this could thin out the tonnage list in the Middle East Gulf (MEG), subsequently putting more upward pressure on rates in that region.
Suezmax Market
Off-market activity continues to be the dominant force in the West Suezmax market. Despite very few cargoes being openly leaked to the market, over 10 vessels have gone on subjects over the past two days. This indicates that a healthy portion of the July 20-25 window ex-West Africa has been covered, with rates seemingly remaining flat. The front end of the tonnage list has shortened; however, for the July 25-31 window, there remains an abundance of candidates available to meet prospective demand.
The US Gulf (USG) market has yet to gain momentum this week, leading to a buildup of tonnage and a fading of rate sensitivity. Only one stem is rumored to be working for the third decade of July. Given the significant number of Aframax vessels ballasting towards the USG, charterers with flexibility will be incentivized to wait and opt for the smaller class if possible.
In the East Suezmax market, a few more vessels were fixed yesterday, again primarily through off-market deals. Based on yesterday’s tonnage count, there appears to be sufficient vessel availability to prevent any significant upside in rates from materializing.
Aframax Market
North Sea Aframax stems have been quietly covered up to around the 20th of July. Market activity has been subdued, with a large portion of available cargoes being absorbed through private programming. The tonnage list is not seeing a substantial boost this month due to fewer vessels arriving from the US. However, with a good number of oil company relets still in the mix, activity is expected to remain subdued heading into the third decade of July.
In the Mediterranean Aframax market, rates have remained under pressure due to the available tonnage actively seeking employment. The market has seen activity this week, but with the second decade of July almost fully booked for local loads and fresh tonnage replenishing the list, any upside potential does not appear to be on the cards. This is further compounded by the unpromising outlook in surrounding areas.
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Source: Fearnleys
