The Perfect Storm
June 7, 2017
Suezmax freight rates out of West Africa have come under recent pressure, plagued by poor fundamentals on both the demand and supply sides of the equation in what can be described as “the perfect storm.” Despite reports of higher crude output in Nigeria and the recent lifting of force majeure on the Forcados crude stream, we have observed just five vessels reported fixed or on subjects by mid-week, representing softer tanker demand. From a vessel supply perspective, the tonnage list in West Africa remains long, compounded by a weaker Arabian Gulf market sending ballasters into the region.
With the tonnage to cargo ratio working in the charterers favor, the voyages across the Atlantic to the US East Coast were quoted at WS 62.5 today, while trips to the United Kingdom were pegged around WS 67.5. Both trades fell about 15 WS points or about 19% from Fridays close; however, we expect the decline to decelerate and freight rates to trade at or slightly below current levels for the remainder of the week. Beyond this period, we project Suezmax rates in West Africa to find some support from steady Nigerian oil output as well as increased crude demand from refiners in both Northern Europe and the US Atlantic Coast. 
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