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Tanker Market - May 13

Source: OPEC_RP130509 5/12/2013, Location: Europe

Global fixtures in April declined by 2.4% compared with the previous month to average 17.44 mb/d. According to preliminary data, OPEC spot fixtures were stable from last month’s level to average12.81 mb/d. Middle East-to-East fixtures reported a decline of 11.1% or 0.30 mb/d from the previous month while Middle East-to-West and fixtures from outside the Middle East both increased by 0.14 and 0.16 mb/d, respectively.

Preliminary data showed that OPEC sailings declined in April by 0.18 mb/d or 0.8% to average 23.64 mb/d. Sailing from the Middle East dropped by 0.16mb/d to average 17.31 mb/d. April arrivals in all areas were seen lower on a monthly basis, with the greatest decline registered on arrivals in North America and Far East ports, which declined by 0.35 mb/d and 0.34 mb/d, respectively. Arrivals in Europe were down by 0.18 md/d or 1.4% from the previous month while arrivals in West Asia declined by 0.1 mb/d.

In the tanker market, the month of April was unkind to tanker owners in all sectors, as both clean and dirty vessels saw a decline in market activity and freight rates. The decline in freight rates and market activity was present for the remainder of April fixtures and continued as the May requirement came along. No improvement has been registered in between, knowing that the month of May is usually quiet due mainly to the end of winter season demand and the start of refinery maintenance season.

In April, the decline in dirty rates was experienced on nearly all reported routes with the exception of Suezmax trading Northwest Europe to US East Cost (USEC)-US Gulf Coast (USGC), which increased by 6% from last month. Other routes reported flat, staying at the same low level seen a month earlier. On average, dirty spot freight rates declined by 4% from the previous month.

Meanwhile the situation was no better in the clean tanker market as both East and West of Suez freight rates dropped in monthly terms by 4% and 5%, respectively. The clean tanker market lacked activity in April, and no real driver was seen to support freight rates during the month.

In April, the downward pressure seen earlier on VLCC market and freight rates remained dominant. The declining trend persisted clearly on the Middle East-to-East and Middle East-to-West loadings as a result of low activity and limited tonnage demand. On a whole, April fixtures were found to be low in numbers.

The May requirement saw a slow start as charterers were comfortable to secure their equipment knowing that the tonnage supply remained ample at all times. Consequently, each inquiry received many offers as result of the prevailing situation. Moreover, the slow release of the May requirements was considered a tactic by charterers to put pressure on owners and maintain the low freight rates.

In a monthly comparison, spot freight rates for VLCCs operating from the Middle Eastto- East declined by 6% to average 33 WS points while those from the Middle East-to- West ended the month flat to average 20 WS points, same as the average rates it registered in the previous two months. Even though West African tonnage demand saw a slight increase in its freight rates in mid-April as a result of a slightly tighter position list and an increased interest from Indian charterers for discharging at the east and west coast in India, the monthly average freight rates for VLCCs operating on the route from West Africa to East declined by 3% in May to average 35 WS points. In an annual comparison, average spot freight rates for all reported routes registered a worthy decline ranging between 45% and 53%.

Generally Suezmax freight rates remained low in April. Spot freight rates for vessels operating West Africa-to-USGC were flat to average 57 WS points as seen in the previous month. Despite some increase in activity seen occasionally during the month, spot freight rates were mostly flat as tonnage surplus remained the main factor affecting rates.

By the end of April, fewer vessels were available, and, after the month’s requirement was completed, tonnage continued to build up for May loadings. As a result, the tonnage supply and demand imbalance continued to prevent rates from achieving any improvements.

On the other hand, spot freight rates for vessels operating on Northwest Europe-to- USEC-USGC saw an increase of 6% from a month earlier yet a drop of 25% from last year’s level. This monthly gain came as result of a relatively active market and a balanced vessel situation to some degree as tonnage availability was tight for some dates. This minor increase registered on freight rates of the said routes is found to be the only positive performance registered in April among all reported routes.

Aframax freight rates declined on all reported routes in April with no exceptions. Spot freight rates at different areas followed the same scenario as the result of being under the influence of the same factors. The limited cargoes available versus the abundant tonnage supply gave no hope to owners to see any increase in rates in different regions. Furthermore, no effect has been seen from weather disturbances or delays at the Turkish straits.

The Caribbean Aframax market had a quiet feel in general with softer rates as the amount of tonnage available exceeded the number of cargoes. Aframax Caribbean-to- USEC spot freight rates showed the greatest decline amid all reported routes as it fell by 17% from the previous month to average 88 WS points, while freight rates for vessels operating on the Mediterranean-to-Mediterranean and Mediterranean-to- Northwest Europe experienced lesser declines as it dropped by 3% and 6%, respectively, to average 85 WS and 83 WS points. The rate on the Indonesia-to-the- East route experienced the lowest decline amid other reported routes in April as it fell by 1% to average 71 WS points.

In April, the bearish sentiment seen in the dirty tanker market was mirrored in the clean market. Overall, freight rates were reported lower for all reported routes or stayed flat at the best. The enhanced sentiment seen in the past couple of months in the clean tanker market was short lived as rates fell this month. However, rates in almost all reported routes remain higher than seen one year earlier.

The first week of April showed improved activity seen mainly for MR vessels in Northwest Europe, which resulted in a shorter position list and thus a minor increase in freight rates in that region. However, the upward trend did not last for long as rates stabilized afterwards despite some delays seen in the US Gulf. Therefore, freight rates registered on NW Europe-to-USEC-USGC stood at 146 WS points as it ended the month flat.

In East of Suez, the continuous efforts of tanker owners to at least stabilize the rates were in vain as freight rates declined as a result of tonnage build-up and declining activity. Consequently, clean spot freight rates for tankers operating the Middle East-to- East and Singapore-to-East routes both declined by 8.5% and 0.6% to average 119 WS points and 157 WS points, respectively.

The situation in the Mediterranean was no better as activity was limited in the market, and the position list was lengthy even for prompt vessels. Therefore, freight rates seen on the Mediterranean-to-Mediterranean and Mediterranean-to-NW Europe routes declined by 8% and 7.5% to average 150 WS points and 160 WS points, respectively.

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