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Tanker Market - June 2016

Source: OPEC_RP160609 6/12/2016, Location: Europe

Dirty tanker market sentiment weakened in May as average spot freight rates dropped on most reported routes. On average, dirty tanker freight rates dropped by 4% from the previous month, mainly on the back of lower rates registered for VLCC and Suezmax, which dropped by 7% and 15%, respectively. Freight rates declined on all reported routes from the previous year and month. However, Aframax spot freight rates saw bright spots, rising by around 6% on average as a result of an active market and premiums paid mainly in the Mediterranean. Clean spot freight rates showed a mixed performance in May, dropping on average. They were mainly affected by lower rates in West of Suez, while those in East of Suez remained mostly flat from the month before.

Spot fixtures
Preliminary data for May shows that OPEC spot fixtures dropped by 3.6%, compared with the previous month, to average 11.49 mb/d. Global spot fixtures declined as well by 2.4% in May, compared with the previous month, to average 16.6 mb/d. Fixtures on the Middle East-to-East route were down by 2.2% and on the Middle East-to-West routes by 0.5 mb/d. In general, global chartering activity showed a drop of 12.6% from the same month one year earlier on reported destinations.

Sailings and arrivals
OPEC sailings dropped by 0.28 mb/d, or 1.2%, in May from a month ago while remaining up by 0.17 mb/d from a year before. Sailings from the Middle East dropped from the previous month by 0.29 mb/d and from one year earlier by 0.06 mb/d. According to preliminary data, arrivals at main importing regions in North American and West Asian ports showed an increase from a month earlier, rising by 0.4%, and 2.8%, respectively, from the previous month. In contrast, vessel arrivals in the Far East and Europe declined from a month earlier by 0.3% and 0.4%, respectively.

Spot freight rates
VLCC
VLCC freight rates dropped on average in May from the month before, down by 7% from April, to stand at WS73 points. Increased activity at the beginning of the month was seen to support VLCC freight rates, mainly in the Middle East and West Africa, despite high vessel supply at that point. Spot freight rates further improved when June requirements came onto the market.

However, rates edged down to reverse previous gains as sluggish demand in the Middle East and West Africa combined with reduced delays in Asian ports to support the expansion of available vessels on the tonnage list. Thus, Middle East-to-East freight rates dropped by 3%, to stand at WS63 points. West Africa-to-East freight rates followed the same pattern, though reflecting a higher drop of 12%, to stand at WS38 points. Freight rates for tankers operating on the Middle East-to-West route also dropped by 8% from one month before.

Suezmax
As seen in the VLCC sector, Suezmax spot freight rates also underwent negative development in May. At the beginning of the month, rates for Suezmax were weak due to holidays and low activity, generally. Increased activity was only later able to stabilize rates and prevent further drops.

In West Africa, spot freight rates for tankers operating on the West Africa-to-US Gulf Coast route dropped by 21% to stand at WS63 points. Spot freight rates for tankers operating on the Northwest Europe (NWE)-to-US Gulf Coast (USGC) route dropped by 8% to average WS63 points. Suezmax rates on both routes showed a higher decline, compared with freight rates registered on the same routes the previous year.

Aframax
In May, Aframax was the only vessel size in the dirty tanker segment, which showed enhanced rates, on average, from a month before. Aframax freight rates increased by 6%, as a result of mixed performance for the class, supported by increased rates for tankers trading in both directions of the Mediterranean.

The markets in the North Sea and Mediterranean were balanced at the beginning of the month before some replacement deals were fixed at high premiums. A lighter tonnage list in the Mediterranean, combined with a sudden shortage of vessels, pushed rates up in that region. Freight rates for tankers operating on the Mediterranean-to- Mediterranean and Mediterranean-to-NWE routes edged up by 25% and 34% to average WS116 and WS109 points, respectively, making Suezmax a viable alternative to Aframax at a certain point, due to its falling rates and weak market.

Spot freight rates went down on the Caribbean-to-US East Coast (USEC) route by 4% from the previous month, despite owners’ consistent resistance to lower rates, as tonnage supply outweighed chartering requirements.

Aframax freight rates to eastern destinations were not an exception, dropping by 18% for tankers trading on the Indonesia-to-East route to average WS91 points.

Clean spot freight rates
Clean tanker market sentiment was weak in May. On average, clean spot tanker freight rates dropped by 11% from the month before to stand at WS125 points. In the West of Suez, freight rates experienced a large drop on average. Tonnage in the West was affected by the holidays and slow movement in the market. Among the main drivers behind freight rate drops in the West was lower freight rates in the Mediterranean, where they dropped by 23% and 22%, respectively, on the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes. Nevertheless, rates for medium-range tankers operating on the NWE-to-US East Coast went up by 7% to average WS119 points as the market was balanced, showing a multi-month high, though the increase remained limited.

Similarly, East of Suez average clean spot freight rates dropped by a slight WS1 point on average, as lower rates were registered for tankers trading on the Singapore-to- East route, where a drop of WS3 points was seen in May to average WS132 points. A slight improvement was achieved by tankers operating on the Middle East-to-East route, which increased by 2% from a month before.

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