Tuesday, June 16, 2009
Tanker market faced with better future?
Tuesday, 16 June 2009
Oil price increases came bundled with some “perks” for VLCC owners, who saw their supertankers’ earnings post a surprising comeback during the previous week, when just until some weeks ago, brokers were openly looking into the issue of ship lay-up as a solution for owners to weather the low rates. Gibson shipbrokers stated in their latest weekly report that everything has changed within the past week. “Rates and earnings in the Middle East VLCC market are now much firmer, earnings are at their highest for 3 months and owners are optimistic that there is more to come”.
After the market spent a lot of time in the sidelines, it has returned back to the $40,000/day level, up from the low of under $5,000/day in mid April and the $8,000 – 12,000/day for the most part of May, when in fact VLCCs earned less than their smaller MR counterparts, ships which cost three times less than a modern supertanker. And all this downturn occurred without any significant change on the market’s fundamentals.
So what triggered last week’s rebound of rates? According to Gibson, all this “emphasizes the huge psychological influence in the short term market and that relatively small fundamental changes can create extreme market fluctuations. In March/April there were slightly fewer VLCC cargoes out of the Middle East, and this was coupled with an increasing number of relets. The consequence was one of negative sentiment and owners prepared to chase the next cargo at rates below last done. Given VLCC fixed operating costs are around $12,000/day, it is perhaps surprising that earnings not only fell below this level but stayed there for all of May.
One of the main factors behind the recent rise in spot rates has nothing to do with supply/demand fundamentals, but rather owners have had to obtain higher Worldscale rates to cover the increase in bunker prices. Following this pick up in Worldscale rates, we now see a slight pick-up in Chinese crude demand, far fewer relets, and a world where there are at least signs of economic recovery. Also, oil prices have been pushed above $70/bbl and raised the possibility that there may be a few more and not less cargoes in the market. All of a sudden owners’ doom and gloom has reversed and they are no longer competing aggressively for the next cargo, but are optimistic, prepared to wait for a higher rate in a in a rising market and put upwards pressure on other crude tanker markets” said Gibson.
