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Tanker Market - Dec 12

Source: OPEC_RP121209 12/12/2012, Location: Europe

Global spot fixtures increased in November by 10.1% to average 18.5 mb/d. OPEC spot fixtures rose as well, by 7%, from the previous month to average 13.00 mb/d, up by 0.86 mb/d from the levels seen in October. The increase is attributed mainly to higher fixtures from the Middle East to the West, which rose by 1.2 mb/d to average 3.3 mb/d, while fixtures from outside the Middle East experienced a loss of 0.25 mb/d or 6.6% from the previous month. On an annual basis, OPEC spot fixtures in November were 11.1% higher than in the same month a year earlier. Sailings from OPEC increased in November by 0.59 mb/d or 2.5% to stand at 24.3 mb/d, a rise of 4.9% from last year.

Middle East sailings stood at 17.9 mb/d, up by 0.62 mb/d from the previous month and 1.2% higher than the year before. Arrivals in almost all reported ports rose in November, with the exception of West Asia, which declined by 0.12 mb/d, reflecting a decrease of 2.6% from a month earlier and of 6% from last year. Arrivals in North America, Europe and the Far East all increased from a month earlier by 12.1%, 2.1% and 1.1% respectively, with annual rises of 11.4%, 2% and 5%.

Spot freight rates for the dirty tanker sector increased in November across a number of reported routes in general, with an exception being Suezmax. Average spot freight rates for VLCCs experienced the strongest gain, increasing by 21.8% from a month earlier to average 41 WS points, a level not seen for several months. This increase, which came mainly on the back of tightening tonnage supply and an improved Middle East market, did not last for long as the end of the month was quiet with activity lower.

Freight rates for Suezmax did not share the rising trend with VLCC, declining on all reported routes by 2.8% on average in November, while remaining stable on other key routes at best. Suezmax freight rates could not maintain the gains achieved at the end of October, as the market remained over-supplied, with limited tonnage requirements.

Aframax freight rates were mixed in November, while freight rates declined on some reported routes. The decline was counterbalanced by gains achieved on the Caribbeanto-US Coast. On average, Aframax freight rates rose by 5.3% in November. Bunker prices decreased in November, allowing owners to reduce operating costs and increasing margins. Taken as a whole, November was a promising month for tankers, as the market situation improved in several segments on the back of an enhanced supply and demand balance.

November witnessed a considerable uptick in VLCC market activity and freight rates. This increase, which was registered on all reported routes, was caused mainly by an enhanced supply-demand formula, as the tonnage list thinned amid higher seasonal demand and an influx of activity resulting from winter season requirements, in addition to increased interest from Asian buyers. Although the available tonnage was sufficient to absorb the increase in demand, spot freight rates benefited from the increase in activity to see a general rise in rates on different routes. For the VLCC sector, rates for tankers operating the Middle East-to-East route saw the largest increase among all the reported routes. They increased by 11 WS points or 30.6% in November from the previous month to stand at 47 points, while rates for tankers trading on the Middle East-to-West routes saw a lower increase of 5 WS points or 20% from a month earlier to average 30 WS points.

The West Africa-to-West route registered the smallest increase among the reported VLCC freight rates, rising by 15% to average 46 WS points. In an annual comparison, all freight rates on reported routes from the Middle East to the East, the Middle East to the West and West Africa to the East showed a drop on the levels seen last year by 20%, 27% and 21% respectively. The stronger market encouraged shipowners to demand higher rates and strengthen their positions against charterers who had expedited Decemberís fixtures, taking into account the prevailing market situation, since fewer ships were available. Following the completion of Decemberís first-decade requirements, market activity slowed down, especially with holidays in the USA and Asia. Moreover, VLCC-owners eased their stand as more competitive quotes were received for second-decade loadings.

The uptick in VLCC spot freight rates did not spill over to the Suezmax class, unlike the owners had hoped. Among all the tankers in the dirty segment, Suezmax saw the only negative performance in November. The Suezmax market did not pick up at any stage of the month, as activity kept declining or remained stable at best. The abundant vessel availability prevented rates from registering any increase, as charterers kept receiving large numbers of offers at any given time during the month, even for prompt requirements. As a result, spot freight rates for Suezmax trading from West Africa to the US Gulf coast declined by 3.4% from the previous month to average 56 WS points; this was because the marginal gain that had been reported on this route the previous month did not last long, since rates went under pressure again due to the decreasing activity in that area. Additionally, spot freight rates for vessels operating from North-West Europe to the USA declined by 2% from a month earlier to average 50 WS point in November.

Annually, the average spot freight rates on both reported routes saw greater declines of 26% and 31% respectively. November was uneventful for the Suezmax class, despite some delays caused by weather disruptions in the Mediterranean and delays in the Turkish Straits.

In the Aframax sector, spot freight rates were mixed, increasing on some routes and falling on others. Rates for Aframax tankers trading on the Indonesia-to-East and Mediterranean-to-North-West Europe routes declined in November by 4% each to average 92 WS points and 72 WS points respectively. The continued tonnage build-up in those areas, combined with severe competition between tanker-owners, kept dragging down the rates. Therefore, no improvement in the rates was detected, despite the congestion in the Turkish Straits, which caused a delay of 3Ė4 days, and the bad weather seen in Western Europe. Rates for the Mediterranean-to-Mediterranean route increased by a slight 1 WS point as a result of a small rise in the regionís activity.

On the other hand, Aframax rates on the Caribbean-to-USA route saw a notable increase in November, rising on average by 25.5% from the previous month to stand at 118 WS points. The gain in rates in the Caribbean was supported by the tight tonnage position and the disturbances caused by Hurricane Sandy. Yet, by the end of the month, rates started to decline as the situation cleared in the Caribbean and more vessels were available at that point. Annually, Aframax spot freight rates on this route gained by 9% from a year ago, while freight rates on all other routes declined.

Clean tanker average spot freight rates were almost stable in November, compared with a month earlier. In a monthly comparison, clean East of Suez rates gained 10.6% in November to average 146 WS points, while West of Suez rates declined by 5% to 156 WS points. Rates for tankers operating on the Middle East-to-East route increased by 15.3% and rates for the Singapore-to-East route rose by 6.9%, while rates for the North-West Europe to the USA increased by 1.7% in November from the previous month.

Nevertheless, a negative performance was registered for spot freight rates on the Mediterranean-to-Mediterranean and Mediterranean-to-North-West Europe routes, declining by 7.7% and 6.3% respectively. Generally, the clean tanker market was quiet and lacked activity in November. The only exception came after Hurricane Sandy, as the disruption after the disaster created uncertainty about the market situation, and this led eventually to a medium-sized increase in freight rates. Apart from this, the clean tanker market was fairly steady in November, but the end of November witnessed an increase in activities and an influx of cargoes which led to a firmer market for both long-range and medium-range tankers. As a result, the freight rates registered some gains as the position list balanced.

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