According to preliminary data, OPEC spot fixtures rose in August after the decrease encountered in the previous month. The rise in August offset the previous decline with a monthly increase of more than 8% on the back of increased activities especially for booking for the second half of September. Similarly, global crude oil spot fixtures increased in August by more than 8%. Middle East fixtures to the west gained the biggest percentage with an increase of around 17%, while Middle East to the east fixtures gained 9%. Non-OPEC spot fixtures rose around 9% to average 6.12 mb/d and OPEC’s share of total spot chartering remained steady at around 67%.
According to preliminary data, OPEC sailings remained steady in August along with a minor increase averaging 23.2 mb/d. Initial estimates indicate that US and Caribbean arrivals increased 4% in August, and arrivals at North West Europe rose by similar levels. However, on an annual basis, US arrivals displayed a y-o-y decline of 10%.
The spot tanker market came under pressure in almost all of its routes. August marked the worst month so far for owners in the spot market with rates reaching the lowest level in 2007 on almost all reported routes, against owners’ hope that July was the market bottom. On some routes, weekly rates reached levels not seen in four years. The increased availability on the back of flurry new deliveries took the driver’s seat and charterers were in a position to squeeze the market further. Steady tonnage demand held the market with charterers capitalizing on the factor of tonnage oversupply, dismissing the impact of the relatively healthy demand level. The Aframax market lost the most ground and the Suezmax and VLCC markets continued to decline in August.
Declining for the third consecutive month, the VLCC sector lost further ground in August to settle 8% lower than in July. Vessel availability remained the main factor affecting the market, with limited activities. At the beginning of August, the VLCC market continued the trend of the previous month with a solid tonnage list dictating the sentiments. At the same time charterers delayed their booking aiming for even lower rates. Therefore, rates continued to decline reaching WS54 on the Middle East/east route, a low level not seen in four years. Thereafter, charterers returned with inquiries lifting up the market toward the end of the month, yet the increase did not offset the initial decline and the monthly average for the reported VLCC routes declined 8% from the previous month.
East of Suez VLCC long-haul rates from the Middle East to eastern destinations declined 8% in August from the previous month to reach the lowest level since June 2005. On an annual basis, VLCC rates on the Middle East/east route declined 55%. Tonnage surplus coupled with refinery maintenance were among the reasons for the continuing decline. Rates of VLCCs trading on the Middle East/west route declined as well to average 3% lower in August compared to the previous month. High ship supply and US imports below expectation coupled with the relatively high stock situation and price backwardation all led to the experienced decline in the Middle East/west VLCC spot freight rates. However, market participants perceive that once the level of US imports increases in preparation for the winter season, the build of tonnage will be cleared and rates could observe some upward momentum.
West of Suez VLCCs moving volumes from West Africa to the East followed the same trend as the other routes and declined on the back of limited activities and tonnage surplus. VLCC spot freight rates on the West Africa/east route declined 14% in August from the previous month, one of the lowest rates reported in recent years. On an annual basis, VLCC rates on this route declined a hefty 46%.
The Suezmax sector followed the same trend as the VLCC sector and declined 15% in August compared to the previous month. The continuing build of tonnage and limited activities in addition to the spill over effect from the VLCC sector all contributed to the mounted pressure on the Suezmax sector and rates declined in response. Suezmax spot freight rates on the West Africa/US Gulf Coast route fell 17% in August from the previous month on the expectation of weaker interest from the US as the end of the driving season unfolds. Additionally, the pressure coming from the VLCC sector added to the bearish sentiment for the Suezmax sector in West Africa, and rates indicated an annual decline of 54% in August. From North West Europe, Suezmax spot freight rates followed the lead of the other market, declining 13% in August from the previous month.
In the dirty market, the Aframax sector lost the most ground in August with an average decline of 23% from the previous month. East of Suez Aframax declined at the beginning of August on the back of lower Chinese fuel oil imports which negatively affected activities coupled with a healthy position list. Additionally, the expectation of higher US imports to meet winter demand halted the decline as market participants expect many Aframaxes to be drawn for lightering operations in the USA. In the Mediterranean, Aframax spot freight rates declined 22% on average in August compared to the previous month. August started with a relatively balanced market in the Mediterranean, although tonnage builds continued as the month progressed while activities were moderate, dragging down the rates to 50% less than in the same period of last year.
In the Caribbean, Aframax spot freight rates started the month on a healthy note in a relatively balanced market. However, as the market was attractive, tonnage started to build as the month progressed and charterers took over the steering wheel. At the same time, the anticipated effect of Hurricane Dean provided some support with owners expecting an influx of employments as a result. However, as the outcome of the hurricane did not cause major disruptions to oil production, the market only had another bearish factor to add to its pain. Aframax spot freight rates on the Caribbean/US Gulf Coast route declined 34% in August from the previous month.
Clean tanker market sentiments were bearish in August with spot freight rates declining 13% on average from the previous month. However, the East of Suez market performed better in August than the West of Suez market which is contrary to the trend of the recent months. East of Suez spot freight rates remained steady in August while West of Suez dropped a heavy 19% from the previous month. In the East, closed arbitrage to the US West Coast for gasoline on the back of lower US prices, in addition to the refinery maintenance in Asia, exerted downward pressure on rates in August. However, the increased naphtha activities on the back of new cracking capacity coming onstream, despite some being shut down, supported rates. Additionally, the opening of a small jet arbitrage window to the US helped remove few vessels from the position list. Accordingly, spot freight rates for clean tanker operating to the East from the Middle East and Singapore ended August with an increase of 3% and a decline of 1%, respectively.
West of Suez clean spot freight rates declined in August with Mediterranean rates declining for the third consecutive month. The closure of arbitrage opportunities and market perception of increasing US refinery runs in the coming period pressured the market and rates declined in the Mediterranean 37% on an annual basis. Additionally, the growing supply of tonnage and the easing of the concerns about the Hurricane Dean added to the bearish sentiment in August. The same factors affected the North West European market although the closure of arbitrage to the US had more weight in terms of clean spot freight rates which fell 21% in August from the previous month. In the Caribbean, clean tanker spot freight rates declined 22% compared to the previous month. The same factor halted activities to the US affecting the Caribbean clean tanker market along with tonnage oversupply so that owners were not encouraged to relocate their ships with interregional sentiments on the bearish side. Caribbean clean spot freight rates declined 40% in August compared to the same period last year.