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Tanker Market - May 2015

Source: OPEC_RP150509 5/12/2015, Location: Europe

Crude oil tanker market sentiment weakened in April as average spot freight rates dropped on most reported routes. On average, dirty tanker freight rates were down 8% from the month before. Despite a stronger market seen in the VLCC sector, average dirty spot freight rates declined, influenced by the declines in Suezmax and Aframax freight rates. VLCC spot freight rates showed improvements, rising by around 17% on all reported routes, as a result of an active market and strong tonnage demand. Suezmax and Aframax both closed the month down by 15% and 12%, respectively, as demand for both classes remained weak amid a persisting tonnage oversupply.

Spot fixtures
Following the drop seen last month, OPEC spot fixtures dropped in April by 4.2%. The decline came mainly on the back of lower fixtures registered for both eastbound and westbound destinations, while global fixtures declined by 2.9% from a month earlier. Compared with a year ago, OPEC and spot global fixtures were down by 11.2% and 9.6%, respectively.

Sailings and arrivals
OPEC sailings were also lower in May, dropping from the previous month and a year earlier by 1.2% and 2.2%, respectively. According to preliminary data, arrivals into North America and West Asia increased by 0.7% and 3.6%, respectively, from the month before, while arrivals into the Far East and Europe declined by 0.5% and 3.1% from the previous month’s arrivals.

Spot freight rates
Contrary to the other vessels in the dirty segment, VLCC freight rates increased in April from the previous month, rising by 17%. The increase, which came as an average of gains achieved by VLCC trading on all reported routes, came mainly on the back of higher activity seen following the Easter holidays, coupled with a tighter tonnage list. The higher freight rates in the Middle East drove the increase in tonnage for West Africa loadings mainly to eastern destinations as the West African market mirrored the Middle East tonnage market. On a monthly comparison, spot freight rates for VLCCs operating from the Middle East-to-East increased by 18% to average WS62 points, while those from the Middle East-to-West ended the month up by 17% to average WS34 points. Similarly, the monthly average freight rates for VLCCs operating on the West Africa-to-East route increased by 17% in April to average WS60 points. Despite being volatile during the month, West African tonnage demand remained generally strong. VLCC ship owners showed great resistance to lower freight rates in a trial to maintain their gains from dropping as the tight availability situation eased. On an annual basis, freight rates for tankers operating on the Middle East-to-East and West Africa-to-East routes increased by 52% and 43%, respectively, from the same month last year.

In contrast, Suezmax freight rates encountered losses from the month before. Insufficient market activity during the holidays leading to increased availability, supported the rate drops encountered during the month. In April, spot freight rates for Suezmax trading from West Africa-to-USGC dropped by 19% over the previous month to average WS73 points. Spot freight rates for vessels operating on the Northwest Europe-to-USGC route dropped by 10% to average WS64 points. Although Suezmax monthly average spot freight rates dropped m-o-m, Suezmax freight rates did experience occasional gains due to higher activity on the West Africa-to-West route and premiums paid for prompt loadings in the North Sea. Despite the monthly drop, spot freight rates for both routes remained higher than the same month a year ago.

In the Aframax sector, spot freight rates dropped on all reported routes with no exceptions. Although the Aframax market experienced high freight rates at the beginning of April, as a result of a pre-holiday rush, freight rates declined afterwards, mainly in the North Sea and the Baltics. The Aframax market in Northwest Europe was firm earlier in the month before rates dropped as a result of an increasing tonnage build, which effected freight rates on several routes in April. Aframax spot freight rates were under the influence of the limited cargoes on the market, while tonnage supply remained mostly abundant. Consequentially, Aframax Caribbean-to-USEC spot freight rates dropped by 18% from the previous month to average WS140 points, while freight rates for vessels operating on the Mediterranean-to-Mediterranean and Mediterraneanto- Northwest Europe routes experienced lesser declines as they dropped by 10% each to average WS105 and WS98 points, respectively. The rate on the Indonesia-to-East route experienced the lowest decline amid other reported routes in April as it fell by 5% to average WS99 points.

Clean spot freight rates
In the clean tanker sector, spot freight rates were mixed as they increased on most reported routes with some exceptions. Contrary to the previous month, the clean tanker market was quiet for tankers of all sizes during April as mainly eastbound fixtures showed lower freight rates than last month.

In East of Suez, low naphtha tonnage demand negatively affected freight rates for tankers operating on the Middle East-to- East route, which declined by 11% to average WS114 points. At the same time, increasing vessel supply, mainly in the long-range (LR) classes, was also a driver of the decline in freight rates, while rates for the Singapore-to-East route increased by 4% in April, compared to the previous month.

In the West of Suez, the clean tanker market got busy following the holidays, and rates mainly increased in the Mediterranean and Black Sea, supported also by port delays. Therefore, freight rates seen on the Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes increased by 12% and 11% to average WS202 points and WS212 points, respectively. While LR1 freight rates were influenced by limited gasoline tonnage demand, freight rates for tankers trading on the Northwest Europe-to-USEC route dropped by 16% to average WS142 points

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