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In October, OPEC spot fixtures showed an estimated increase of nearly 0.6 mb/d or 4.8% to average 12.7 mb/d. Although the first increase since June compared to a year earlier, OPEC spotfixtures were around 1.83 mb/d lower. The drop in spot fixtures from a year ago came as a result of the combination of a decline in OPEC production and a slowdown in demand. Despite the increase, OPEC’s share in total fixtures declined by 3 percentage points to 63%, similar to the lowest level in 2006 — which was in March — indicating that non-OPEC spot fixtures experienced a stronger increase relative to OPEC. Middle East eastbound fixtures (including non-OPEC members) fell 0.8 mb/d or 14% to 4.7 mb/d, while westbound fixtures rose 0.2 mb/dor 17% to stand at 1.6 mb/d. The increase in westbound fixtures was due to particularly strong bookings from the USA. Non-OPEC spot fixtures rose 1.20 mb/d or 20% to average 7.3 mb/d,which was 1.2 mb/d below a year earlier.
As a result, total global spot fixtures increased 1.8 mb/d to average 20.0 mb/d. OPEC sailings rose nearly 1.0 mb/d to 24.1 mb/d, an increase of 0.4 mb/d above the same month last year.Sailings from the Middle East increased 0.3 mb/d to stand at 18.1 mb/d. Preliminary data shows that arrivals at the US Gulf and East Coast and the Caribbean rose to 11.9 mb/d in October.Similarly, arrivals in North-West Europe increased by less than 0.1 mb/d to reach 7.6 mb/d. In contrast, arrivals at the Euro-Mediterranean basin averaged 4.9 mb/d, the second highest levelafter February this year.
The crude oil tanker market showed a mixed pattern in October with the Suezmax and Aframax sectors leading the upward movement while the VLCC sector lost some of its ground anddeclined on most routes. VLCCs trading on the Middle East/eastbound long-haul route fell a crucial 39 points to average WS85, the lowest rate since June 2006. The October decline of 31% for the Middle East/eastbound long-haul route was the second largest drop in 2006 after the 36% fall in March. The weak VLCC sector for the Middle East/eastbound route is attributed to the reduction of crude output by Middle East producers, the prospect of OPEC’s cut and the moderate number of fixtures compared to vessel availability, not to mention the narrowing of the Brent/Dubai differential which exerted pressure on Dubai-priced crude bound for Asia. Similarly, VLCC trading Middle East/westbound rates fell 20 points to average WS77. The high US stock levels and refiners’ interest in rival crude can be seen as the reason behind the 20% decline in freight rates compared to the previous month and the y-o-y loss of around 22%.
In contrast to the VLCC sector, the Suezmax sector experienced marginal to moderate increases in spot freight rates on its different routes. The West Africa/US Gulf Coast route saw ratesincrease by 16 points to average WS156, due to increasing output coupled with the US refiners’ interest. On the other hand, freight rates on the transatlantic route increased a marginal 4 points to average WS147 representing a y-o-y decline of 24%.
The Aframax tanker market showed mixed movements with rates on the Caribbean/US East Coast route gaining 68 points to reach an average of WS240, the largest increase so far this yearand only 2 points below the highest rate in 2006 for that route. Similarly, rates for shipping within the Mediterranean rebounded from their lowest level in September to reach WS199, the highest rate so far this year. Limited tonnage at the beginning of October, which eased at the end of the month, was one of the reasons for this market support. On the Mediterranean/North-West Europe route tight availability at the end of October contributed to the rate increase of 52 pointsto average WS194. Additionally, the delays caused by the shortened daylight hours at the Bosporus Strait, which assisted in reducing vessel availability, and the normal pattern ofpreparing for the winter peak in refinery runs contributed to market trends.
In the product tanker market, freight rates continued their downward movement on almost all routes. Freight rates for 30,000-35,000 dwt tankers moving from the Middle East and Singapore to the East lost 68 and 106 points reaching an average of WS191 and WS221 respectively partially due to high tonnage availability. The decline represents a y-o-y loss of around 61%, yet the extremely high freight rate levels following Hurricanes Katrina and Rita in 2005 were amajor reason for the y-o-y decline.
In the west, freight rates were steady with a marginal decrease of 6 and 2 points on the Caribbean/US Gulf Coast and North-West Europe/US East and Gulf Coast routes respectively reaching WS260 and WS223. The refinery maintenance season in thewest following the summer gasoline demand season, coupled with the normal stock building ahead of winter and the mild weather, were the main reasons for the steady level of trade. In the Mediterranean, rates followed the same trend with a decline of 16 and 17 points to average WS215 and WS224 on the Mediterranean/Mediterranean and Mediterranean/North West Europe routes respectively. It is worth mentioning that rates were higher than the historical average.
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