Wednesday, June 17, 2009
VLCC Sector Suffered Most During May
Wednesday, 17 June 2009
Although OPEC members continue to follow a tight oil export policy, May was a quite strong month for the tanker market. Apart from the VLCC sector, the tanker market witnessed a relatively good month in May compared to the previous four months of 2009. The month ended with gains in all other vessel categories with the clean tanker market performing even better. The weakest sector in May was once again the VLCC sector which is apparently the sector that suffers most from the continued global economic crisis and OPEC production adjustments. But, as we pointed out in Monday’s top story, even the VLCCs have managed to rebound strongly during the previous week and regain significant part of the lost ground.
According to the latest OPEC’s Oil Market Report that covers the month of May, high tonnage availability of the VLCC sector in May was enhanced by the return to the market of as many as 20 vessels that were tied-up in storage operations. In May, storing at sea lost momentum towards the end of the month with the narrowing of the contango structure in crude oil futures. Estimates put the number of VLCCs that were still tied up in storage operations at the end of the month at about 34 vessels, down from 53 at the end of April, representing about 7% of the global VLCC fleet.
In addition, it is estimated that about 28 new VLCCs entered the market since the beginning of the year with very few getting out. In May the Suezmax market was in a better shape in both West Africa and North West Europe, while the Aframax sector performed the best and ended the month with good gains compared to April.
Sailings from OPEC in May were 22.85 mb/d, up 2% from 22.37 mb/d the previous month, but 6% lower than the same month a year earlier. Middle East sailings in May were at 16.71 mb/d, about 3% higher than at the previous month, but 5% lower than a year ago. Crude oil arrivals in the US dropped by 5% in May compared to the previous month. Crude oil trade figures indicated that US crude oil imports were 8% lower in May compared to the previous month, in line with lower crude arrivals to the country. Crude oil arrivals in Europe were also lower in May, while those in Japan were steady, both compared to the previous month.
Taking the top three vessel categories into consideration, average spot freight rates for crude oil tankers were 5% higher in May compared to the previous month, yet 69% lower compared to the same month a year earlier, taking into consideration the changes in WS flat rates as of January 2009. Once again the VLCC sector was the weakest sector in May, declining by a further 5% from already very low rates the previous month. The Suezmax sector was almost steady this month with a slight increase of about 2% compared to a month earlier. Aframax freight rates had a relatively strong showing in May with a good level of activities to the West of Suez lifting average rates for the month by about 14% compared to the previous month.
On average, the VLCC spot freight rates were 5% lower in May compared to the previous month and substantially lower, by 78%, compared to the same month a year earlier. New vessels entering the market together with the release of about 20 VLCCs from storage operations at a time of lower OPEC production have all led to a substantial tonnage availability in the market, further depressing freight rates in this sector to levels not witnessed for a long time. It was reported that VLCC fixings out of the Middle East in May had declined to 98 compared to 107 during the same month last year. Spot freight rates for VLCCs trading on the long haul route from the Middle East-to-East, which declined by 25% in April compared to the previous month, declined by another 5% in May compared to the earlier month. Freight rates on this route started the month at WS30, reached WS27 in Mid-May and ended at WS29 with a monthly average of WS29. Middle East-to-West spot freight rates closed the month at an average of WS22, steady compared to the previous month after reaching as low as WS20 in the middle of the month. On the other hand, VLCC spot freight rates for voyages from West Africa-to-East were fluctuating between WS32 to WS37 throughout the month, ending at an average of WS33, about 8% lower compared to the previous month, the highest drop among all reported VLCC routes this month.
Suezmax spot freight rates for voyages to the US from West Africa and Northwest Europe (NEW) increased marginally in May by an average of 2% compared to the previous month, yet were 68% lower compared to the same month a year earlier, taking into consideration the changes in WS flat rates as of January 2009. On the West Africa-to-US route, freight rates firmed during the first half of the month supported by an increasing interest to load West African crudes onto smaller Suezmax vessels which pushed freight rates to as high as WS64 before weakening again, ending the month at WS42 with a monthly average of WS55. Freight rates on the NWE-to-US route followed exactly the same pattern of fluctuations, ending the month at an average of WS53.
Average Aframax spot freight rates for the four reported routes increased in May by 14% compared to the previous month, yet were 66% lower compared to a year earlier. Apart from the East of Suez Aframax route, all West of Suez routes ended with a monthly gain compared to April, taking advantage of the 140,000 b/d increase in May’s scheduled loadings of the Russian exports through the Black Sea. Freight rates on both the Mediterranean to NWE and the Caribbean to the US Coast Aframax routes indicated the highest monthly increase of 26% and 23% respectively, both compared to April. Rates on the cross Mediterranean route ended the month at about WS62 with a monthly average of WS68 indicating a gain of 10% compared to the previous month. To the East of Suez, freight rates on the Indonesia-to-East Aframax route were 3% lower in May compared to April mainly due to modest activity and plenty availability of tonnage.
The clean tanker market
The clean tanker market rebounded in May on the back of a very weak previous month. Apart from the East of Suez-to-Singapore route, all reported routes ended the month with a clear gain compared to a month earlier. On average, combined freight rates forEast and West of Suez increased by 37% compared to the previous month, yet were 48% lower compared to the same month a year earlier. Storing
products at sea continued in May, though at a slower pace compared to a month earlier. By the end of May, about 30 to 35 clean tankers were tied up in storage operations mainly in Northwest Europe. In addition, reports also indicated that at least two new VLCCs were hired to store gasoil in Europe toward the end of the month. The relative weaker showing of the East of Suez market was due to the fact that most of product floating storage was taking place to the West of Suez while the markets in Northwest Europe and the Caribbean were very active. The Middle East-to-East route, where freight rates declined by 37% in April compared to March, rebounded in May with an increase of about 20% compared to the previous month. Rates on this route started the month at about WS60 and ended at WS73 with a monthly average of WS65 compared to WS54 in April. Freight rates on the Singapore-to- East route dropped by 5% in May compared to the previous month. As a result, average East of Suez clean spot freight rates were 7% higher in May compared to the previous month but lower by 55% compared to the same month a year earlier.
On average, West of Suez clean freight rates were 47% higher in May compared to the previous month and were 46% lower compared to May 2008, taking into consideration the changes in West of Suez flat rates as of January 2009. Gasoline movements trans-atlantic from NEW continued their strong showing which started during the second half of April during most of May before easing towards the end of the month. Freight rates on this route ended the month at WS121 with a monthly average of WS125 indicating the highest increase of 64% among all West of Suez clean routes. Clean spot freight rates for the Caribbean-to-US route also increased by 60% in May compared to the previous month, but rates here were much stronger during the first half of the month, reaching as high as WS156 before ending at WS140 with a monthly average of WS147 compared to WS92 in April. In the Mediterranean, clean spot freight rates for both the cross-Mediterranean and the Med-to-NWE routes were higher in May by an average of 35% compared to the previous month.
Makis Theodoratos, Hellenic Shipping News
