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Weekly Tanker Market Snapshot

June 9, 2017

The following is an overview of tanker spot market activity for the week ending June 9, 2017

VLCC

We counted about 20-22 vessels reported fixed or on subjects in the Arabian Gulf this week with freight rates relatively steady at WS 50 for AG/East depending on factors such as age, preferred destination and if the vessel was disadvantaged.  The TCE for a voyage on the AG/Japan route was pegged around US $16,000/day (WS 50), while AG/West paid in the mid to high WS 20s with less downward due to the fact that the follow up voyage from Caribbean to the East was in the very low US $3 millions for Singapore, plus US $1.0 million for Ningbo, which gives a TCE of about US $21,000/day with normal wait times. 

We observed about 9-10 vessels reported fixed or on subjects out of West Africa with rates steady in the mid to high WS 50s for various East options.  The TCE for a West Africa/China voyage was around US $19,000/day, while West Africa/India was pegged at US $23-24,000/day, which made it a better deal than an AG/USG/Carib/Singapore triangulation in some respects.  Charterers in the Western Hemisphere booked 4-6 vessels; however, rates remained weak with US Gulf to Singapore below US $3 million and Caribbean to Singapore fixing in the very low US $3 millions.  One deal was reported on subjects from the UKC to Korea at just under US $3.9 million, while nothing was reported out of the Mediterranean or Brazil this week.  Interestingly, about four Suezmax cargoes seen out of the Caribbean and US Gulf to the East were fixed at a higher rate/bbl level than if a VLCC were used.   

SUEZMAX

The West Africa market continued to feel the pressure of ample tonnage in combination with a meager volume of inquiry this week.  At the start of the week a rate of WS 74 was achieved for discharge in the UKC-Med and as inquiry surfaced freight rates continued to decline, falling further to WS 67.5 UKC-Med and WS 65 for USAC.  A modest rebound to WS 70 mid-week did little to comfort owners and as the week progressed we observed rates fall to year lows of WS 62.5 basis USG and WS 65 basis UKC-Med.  Additionally, WS 72.5 was concluded for the USWC twice, while a cargo to the East fetched WS 72.5.   

Despite an uptick in activity freight rates succumbed to the general malaise of the overall Atlantic Basin market.  The Black Sea/UKC-Med trade fell a further five WS points to WS 72.5, while a voyage on the EMed/EC Canada route concluded at WS 55 on an ex-dry dock vessel.  Lastly, a cargo loading Algeria for discharge in Australia was covered at US$ 2.775 Mil and represented the only East voyage.

Fixing volume was fairly robust in the Americas with about nine vessels reported fixed or on subjects, nearly double last week’s activity.  Despite this, freight rates remained stagnant for the most part as the weak Atlantic market gave owners cause to stay local.  Voyages on the Carib/USG route traded consistently at WS 65, while cargoes destined for China paid in the US $2.875-3.2 million range, depending on load and if heat was required.  In the West Coast Americas, a vessel was placed on subjects at US $1.8 million basis Ecuador/East. 

With Saudi Arabia and the United Arab Emirates (UAE) placing a ban on Qatar flagged tonnage from trading to/from their ports as well as other tonnage trading between the nations, some charterers avoided uncertainty by chartering two Suezmaxes in lieu of VLCCs, which usually co-load at various ports in the Arabian Gulf.  This first poised a positive opportunity for Suezmax owners; however, it failed to yield any significant results with freight rates on the AG/East trade at WS 67.5 consistently.  The lone fixture out of Kharg Island for UKC-Med discharge was covered at WS 39, up slightly from last week, while a voyage to Durban fetched WS 47.5.

AFRAMAX

The Caribbean market suffered this week with TCEs just a touch above US $4,000/day, not yet a year low.  The weakness in this market is likely to persist next week as we expect freight around WS 90.  It was similar story in the Black Sea/Mediterranean market with rates down to WS 95 across the board.  Activity picked up towards the end of the month and delays in Trieste also rose; however, the oversupply of tonnage mitigated any potential rate support.  We remain of the opinion that the Mediterranean market will be supported by higher Libyan output compared to last year; however, production is likely to remain at current levels. Recent reports indicate that the National Oil Corporation’s intentions to boost output to over 1 million b/d may be too ambitious as upgrades and repairs are required on infrastructure, while foreign oil entities tend to steer clear of investing in a country with consistent militant conflicts.  There have also been reports that oil output was cut down by a quarter due to protests from oil field workers

PANAMAX

Activity was spotty in the Caribbean this week as the market softened a hair to WS 112.5 on an early week Mexico stem. There is ample tonnage in both the USG and Caribbean for any potential cargoes and we don’t expect much change in the market going forward.

Fixing increased in the UKC-Med this week, but rates made no improvement from last week levels. The trans-Atlantic market remained flat at WS 112.5-115 levels for USG discharge and with vessels still available in the region, we project a flat trend for the weeks to come.

CLEAN

LR2s in the Arabian Gulf have had a steady week with rates creeping up to WS 90 for TC1. Uncertainty about co-loading at Qatar has led to charterers and owners to hold off from committing, it has also provided a premium if required. However as it stands still prompt tonnage keeping a lid on things. As such rates remain 75 x WS 90, AG/West x US $1.35million and EAFR 90 x WS 87.5. 

LR1s have had an active week with nearly 20 vessels going on subs for both long and short haul cargoes. Tonnage has been more than enough to match demand and as such rates have corrected back to WS 105 for TC5. The majority of cargoes have now been covered out to end 2nd decade June. The market will need more activity start of next week before owners can look to push. AG/UKC – US $1.1 million, Sikka/ag 235k, Sikka/Spore-EAFR WS 110. 

The USG market got off to a quick start with cargoes coming out one after the other for early second decade dates.  Again as it has been the previous month much of the demand was driven by cargoes discharging in Brazil and Argentina.  Unfortunately for owners, a glut of tonnage kept rates at bay for most of the week with a slight jump for a day before coming back to earth.  The USG/UKC trade remained steady throughout the week and closed at 38,000 x WS 112.5 the same rate it open at.  The largest gains were seen on the USG/ECSA route as rates firmed 20 WS point by Wednesday to 38,000 x WS 190 before ultimately coming off to WS 180.  Heading into next week tonnage still remains available for early second decade and will keep rates stable even with an expected early rush on Monday.