Wednesday, March 18, 2009
Less oil from OPEC, Less Tankers on the Sea
Wednesday, 18 March 2009
The tanker industry has begun to feel the pain from world recession as it translates to less demand for oil. OPEC cut its daily production late last year and its members have improved their compliance to the current productions quotas. As a result, sailings from OPEC were 4% lower in February, at 19.06 mb/d, down from 19.86 mb/d the previous month, and were also 21% lower than in the same month a year earlier. Middle East sailings in February were at 13.73 mb/d, about 3% lower than the previous month and down 23% from a year earlier. Crude oil arrivals in the USA dropped by 4% in February compared to the previous month. Crude oil trade figures indicated that US crude oil imports were 8% lower in February compared to the previous month, in line with lower crude arrivals to this country.
Crude oil arrivals to North-West Europe were steady, while arrivals to the Mediterranean and Japan were 7% higher each, all compared to the previous month.
According to the monthly Oil Market Report of OPEC that covers February, high tonnage availability on many key routes as a result of OPEC’s production cuts and the ongoing global economic crisis continued to pressure the tanker market in February. However, in February, storing crude at sea related to the contango structure in crude markets and continued to play a major role in preventing dirty freight rates from incurring deeper declines, especially through the effect on the VLCC vessel sector, and to a lesser extent, the Suezmax vessel sector, which enjoyed an unexpected higher demand out of the increased interest of some market participants to store their crude at sea.
In February, VLCCs were still being used for storage in the Middle East, the USGC, Asia and the North Sea, a process that actually started earlier during the fourth quarter of 2008, but gained more momentum throughout early 2009. While some reports indicated that a few vessels were returning to the market in February, a sign that the contango is easing slightly, which might strongly influence spot freight rates during the coming months, estimates were still putting the number of VLCCs being tied up in storage in February at about 35 to 40 vessels making up 7% to 8% of the VLCC global fleet. To some extent, tonnage availability was also affected in February due to several vessels opting to avoid the Suez Canal in favour of the longer route through the Cape of Hope straight amid increasing piracy in and around the Gulf of Aden. Low loading schedules for Russian crude through the Black Sea, in both January and February, pressured freight rates in this
region, especially for both Suezmax and Aframax vessels.
Taking the top three vessel categories into consideration and their nine main reported routes, spot freight rates for crude oil tankers were lower in February compared to both the previous month and February of the previous year. Once again, it was the Aframax sector to the West of Suez that witnessed the highest drop in freight rates in February compared to the previous month. Freight rates for the VLCC and Suezmax sectors also dropped in February, almost by the same percentage. On average, dirty freight rates declined in February by about 17% compared to the previous month.
On average, VLCC spot freight rates were 15% lower in February compared to the previous month. Extra demand for VLCCs for floating storage in February was not enough to offset the effects of lower crude oil liftings due to a large extent to OPEC’s decision to cut production by more than 4.0 mb/d from September levels. Spot freight rates for VLCCs trading on the long-haul route from the Middle East to East, which were firm since November 2008, declined by 19% in February compared to the previous month. Most of the decline in freight rates on this route took place during the first week of the month, which firmed during the second and third weeks before easing again towards the end of the month. Spot freight rates on this route started the month at around WS49, dropping to WS41 by the end of the first week and then ending the month at about WS49 again.
Middle East to West spot freight rates closed the month at a lower drop of 5% in February compared to the previous month. It was the lowest drop compared to other VLCC routes. Throughout the month, freight rates on this route peaked at the end of the third week at WS43 before ending at WS40 with a monthly average of WS39. On the other hand, VLCC spot freight rates for voyages from West Africa to East were within the range between WS58 to WS43 throughout the month, ending with an average of WS46, about 5% lower compared to the previous month.
Suezmax spot freight rates for voyages to the US from West Africa and North West Europe declined in February by an average of 15% also compared to the previous month. Tonnage build-ups of Suezmax for West African cargoes were exerting pressure on freight rates in this region. The implementation of production cuts and lower exports of Russian crude were the main reasons behind the bearish sentiment of this market and higher BTC loadings in February were not enough to change this.
Freight rates for Suezmax West of Suez were fluctuating similarly throughout the month. From West Africa to the US Gulf, Suezmax spot freight rates ended the month at an average of WS72 which implied a decline of about 13% compared to the previous month. The decline was about 16% for the North West Europe to the US route which ended the month at an average of WS65.
Average Aframax spot freight rates for the four reported routes were 20% lower in February compared to the previous month. For the second month in a row, freight rates for Aframax were dropping the most compared to other sectors. To the East of Suez, freight rates on the Indonesia to East Aframax route were very close to their low levels of the last week of the previous month, mainly due to high tonnage build-ups as a result of lower activity in the market, ending the month with a 14% decline. Declines were much higher to the West of Suez where freight rates for the Caribbean to the USEC route ended the month at a 30% decline compared to the previous month. In the Mediterranean, freight rates on both cross-Mediterranean and Meditrranean to North West Europe routes were following the same pattern of weekly
fluctuations over the month, declining during the first week, rebounding during the second and third week before declining again towards the end of the month. Freight rates on both Mediterranean routes ended the month at an average of WS88 for the cross-Mediterranean route and WS83 for the Mediterranean/North West Europe route, indicating declines of 17% and 19% respectively, both compared to the previous month. In general, an oversupply of tonnage in the market and a low activity were the main reasons behind the bearish sentiment and lower freight rates for the Aframax routes during this month.
0 comments:
Post a Comment