Industry Note No. 3 - Waiting for a Swell

Since the start of 2013, VLCC spot rates have been under pressure as a result of the usual suspects of excess tonnage availability and relatively weak demand. The latter has been further exacerbated by seasonal refinery maintenance, particularly in the US. According to data from JBC Energy, roughly 2 million b/d of North American refining capacity was scheduled to be offline during each month of the first quarter. In the Asia-Pacific, refinery turnarounds are set to reach 1.9 million b/d in March, an almost three-fold increase versus February and are expected to climb to 2.3 million b/d in April before falling in May. These reduced throughput rates, combined with vessel availability and concerns over the global economy, are pressuring VLCC rates. Year-to-date the voyage from Ras Tanura to Chiba has averaged WS 35 while the same period averaged WS 51 (Basis 2013 WS100).