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The Tanker Market - Jul 10
Source: OPEC_RP100709 7/15/2010, Location: Europe
Financials and Investment
Estimated OPEC spot fixtures decreased by 1.6% in June, while global spot fixtures fell 8%, both compared to the previous month. Despite the decrease in OPEC spot fixtures, the monthly change remains higher than global spot fixtures, supported by an increase in throughputs at Asia-Pacific refineries which started in May after most of the
maintenance ended. Eastbound Middle East spot fixtures increased 9.8% m-o-m reflecting the increasing demand from Asia-Pacific refineries, while spot fixtures to the west decreased 8.5% on a monthly basis. On a yearly basis, OPEC spot fixtures declined 6% and global spot fixtures fell 5%.
According to preliminary data, OPEC sailings during June increased 0.7% m-o-m, reaching an 18-month high of 23.57 mb/d. The edging up in OPEC liftings will be reflected on July arrivals, especially to Asian destinations. Similarly, Middle East sailings rose 0.9% compared to the previous month.
On the arrivals side, almost all regions experienced a decline with only West Asia showing a small increase of 0.3% compared to the previous month. The decline in North America’s arrivals comes after an impressive increase in May, despite the decrease of seaborne imports. However, North American arrivals remain healthy. Europe seaborne imports also decreased, reflecting the increasing demand for Russian crude to Northwest European refineries.
The crude oil market displayed a mixed pattern in June. While VLCC spot freights increased 9.9% m-o-m, Suezmax and Aframax decreased 15.6% and 28.1% respectively over the previous month. June was the busiest month since April 2008 for the number of liftings reported, but there remains an overhang of June vessels pushing July dates.
The VLCC market was active during June, especially on Middle East routes which experienced a steady stream of cargoes allowing owners to demand better rates. Eastbound Middle East spot freights increased 26.3% as westbound rose 12.5% m-o-m. The tonnage supply/demand situation was fair during the first three weeks, supported by the momentum created by Chinese charterers which accounted for about a third of VLCC fixtures from this area.
For West African liftings to the east, the VLCC market received little influence from the Suezmax market resulting in a spot freight decline of 5.6%. Despite the increase during the second and third week, as result of a limited supply of VLCC tonnage in the Atlantic and the upward trend in the Middle East, the decline in the last week of the month was
enough to push the monthly average for spot tanker freight below the May level. The fourth weekly decrease on VLCC tonnage supply also affected the Middle East market, but not enough to bring the monthly average down from May.
Suezmax market spot freight rates declined in June, reflecting muted activity as well as excess tonnage availability. The West Africa route to the US Gulf Coast declined 16.9% m-o-m as result of limited requirement. The increase in VLCC rates during the second week of the month provoked a small peak of W110 on the West Africa/US Gulf Coast route during the second week.
The Northwest Europe route to US Caribbean and Gulf Coast spot freights also declined by 14.3% in June. The drop was partly the result of reduced production at North Sea fields due to the maintenance season, resulting in a quiet market during most of the month, combined with owners’ resistance to any downward pressure that was broken at the end of the month when some of the Suezmax vessels accepted lower earnings. The oil spill in the Gulf of Mexico has not impacted the Suezmax market, with no delays appearing so far.
All Aframax routes’ spot freights declined in June compared to the previous month and Mediterranean to Northwest Europe spot freights also fell on a yearly basis, representing the only y-o-y decline. In June, Indonesia eastbound route spot rates dropped 9.3% reflecting a slowdown in the market.
The Caribbean route to the US East Coast spot freight rates fell 23.1% compared to the strong May levels with low volumes and ample tonnage supply being the main reasons for the decline. Nevertheless, at the end of the month, the spot freight on the Caribbean route jumped to a weekly average of W166 due to the beginning of the hurricane
season and the development of Hurricane Alex. July movements are expected to result in shipping delays, thinning tonnage supply and a steady but firm market.
The inter-Mediterranean and Mediterranean/Northwest Europe spot freight rates also declined by 35.6% and 39.9%. The Mediterranean/Northwest European route’s spot freights reached the lowest level so far this year. After performing poorly in the first three weeks of the month, Mediterranean spot freights recovered in the fourth bringing
some hope to owners, but immediately declined again at the end of the month.
Spot rates in the product tanker market declined 5.1%, after experiencing a mixed pattern. Rates on almost all routes declined with the only exception being the Caribbean/US Gulf Coast. East of Suez route spot freights fell 11.4%
in June after a very strong May, while West of Suez remained almost at the same level with only a 2.3% decrease. The decline in the Middle East/East route and Singapore/East route markets reflects the increasing level of runs
in Asian refineries.
The decrease was given despite the increase in naphtha arbitrage that boosted product imports in Asia, but was not enough to offset the decline in other products. The Caribbean/US Gulf Coast was the only clean route with a positive change in its spot freight rates, with an increase of 10.3%. The increase in the Caribbean/US Gulf Coast rate reflects the seasonal increase in North American consumption.
The Northwest Europe/US East Coast and US Gulf Coast spot freights also declined by 3.2% in June, while the transatlantic rates continued the decreasing tendency started in February after the significant recovery in January. The Mediterranean/Mediterranean and Mediterranean/Northwest Europe route also experienced declines of 7.7% and 7.3% respectively, with reduced quantities of diesel in the trade market and large amounts of tonnage available, the freight rates in the area fell. The opening of some refineries that finished their maintenance period also contributed to the decrease in clean spot freights.
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