Does this Market Rally Have Legs?
In the midst of a tanker market down-cycle, pressured by over-ordering in prior years, DPP freight rates have surged to the highest levels observed since the winter season of 2016/17. Spot rates on the VLCC TD3C trade began September in the low WS 50s before gradually trading up towards WS 60.5 towards the conclusion of the month. Through the first half of October, the market surged to the WS 80s, peaking as high as WS 88. Many market participants will look to this as sign of a cyclical reversal; however, we view this as a temporary shock to the market influenced by various underlying dynamics.
VLCC Utilization Up in November
In November, VLCC utilization increased to the highest level observed since the beginning of the year at 60.55%, nearly as high as the level observed in November 2017 (60.58%). Through the first 11 months of the year utilization has averaged 59.99%, compared to 61.95% in the same months of 2017. Although both ton-day demand and ton-day supply decreased month-on-month, the pace of declines in the latter was greater than the former, placing upward support for utilization. Over the next month period, we expect utilization to fall as demand tempers on the back of lower import requirements in Asia, while vessels continue to be delivered to the fleet amid low incentives to scrap tonnage.
2018 Mid-Year Update
- Global Economic Outlook
- Oil Supply and Demand Outlook
- Tanker Tonnage Demand and Supply
- Tanker Market Technicals
- Asset Market Review and Outlook
- Year-to-Date 2018 Market Activity
- McQuilling Forecast Performance
- Short-Term Outlook 2H 2018
- 2018-2022 Outlook Update
- Analytical Appendix