Tanker Operator has taken the crude aspect and will reproduce the products sector in the March issue of the magazine.
Although overall tanker demand continued to grow in 2016, weakness took a hold of the markets as tonnage lists swelled on the back of an influx in newbuilding deliveries and a lack of tanker exits.
Aframaxes posted the largest decline in TCE earnings year-on-year, with a 56% drop in rates, followed by the Panamax sector with a 50% fall in TCEs year-on-year.
The Arabian Gulf VLCC spot market was a constant swinging pendulum last year, trading over TCE $60,000 per day to the West and above TCE $100,000 per day to the East at the start of the year, before gradually falling month-on-month up until April.
At that point, rates started to pick up again prior to the summer trading months, when demand is historically tempered. In August, the TCE for AG/West dropped to as low as $10,000 per day and AG/East saw about TCE $23,000 per day at the same time.
Momentum began to pick up again as the market headed into the winter season, with AG/West peaking in the mid-$30,000 per day range in December and AG/East at just under $70,000/day.
The Atlantic Basin fared similarly to the Arabian Gulf, exhibiting signs of the strength at the beginning of the year and then slowly losing traction as the months progressed, with WAFR/China reaching its lowest point in September with TCEs around $15,000 per day.
Rates did pick up again before the end of the year, ending with WAFR/China closing the year just slightly above TCE $44,000 per day.
The basic story for this tanker sector revolved around supply and demand, but was most significantly impacted by an influx of newbuilding deliveries throughout the year. The counter balances were port delays, storage and an end-of-year surge in demand due to the expectation that crude oil prices will rise once OPEC production cuts were implemented in the new year.
The West Africa Suezmax market carried freight rates from 2015 into 2016 fairly seamlessly as Worldscale rates for WAFR/UKC traded consistently in the WS80s for the early part of the first quarter and then dropped into the mid-WS 70s toward the end of March, yielding a TCE of about $27,000 per day.
A similar pattern was witnessed in the second quarter, as rates fell into the mid-WS50s mid-quarter before rallying again. The third quarter brought with it an increase in newbuilding deliveries to the region, as well as production issues, particularly in Nigeria, which wreaked havoc on the spot market.
Freight rates collapsed into the low-WS30s basis UKC-Med discharge, pushing TCEs below $5,000 per day. The market found some balance once Nigerian production rebounded to a more ‘normal’ level. In the last month of the year, rates peaked at the WS120 level, before closing the year around WS95 or about TCE $29,000 per day.
The Black Sea/Mediterranean market traded much like West Africa, with modest short-lived volatility. Delays transiting the Dardanelles/Bosporus were generally not significant, with only brief periods where delays exceeded seven to eight days in each direction.
Libya liftings began to accelerate as the year came to a close and are expected to continue to climb in 2017. The Black Sea/Mediterranean route traded at an average of WS84 throughout 2016, an average TCE of $22,585 per day.
It was business as usual in the Caribbean/US Gulf Aframax market with rates ebbing and flowing throughout the year.
The highest recorded rate of the year was WS229 (TCE $46,000 per day), which occurred in December, while the trough of the market was reached in August with a rate of WS72.5 (TCE $4,000 per day). This market was influenced both positively and negatively by the usual suspects – oversupply, weather and ullage delays.
The expansion of the Panama Canal was a non-factor for Aframaxes this past year and will likely remain the case until more ships are retrofitted with the proper chocks required to transit.
Exports from the US Gulf to Europe continued in 2016 and are expected to expand this year if the WTI/Brent spread remains conducive and swing shale producers bring production back online as oil prices improve.
Aframaxes went for a roller coaster ride in the Cross-Mediterranean market in 2016, with rates bouncing around between highs and lows all year. In the summer/autumn months (July-October) this route was averaging less than $10,000 per day, while the start of the year saw daily rates between $20,000-$30,000 per day.
The Caribbean Panamax market trended in a similar fashion to the Aframaxes in that average rates slid for the majority of 2016, up until the last two months of the year.
After beginning the year at an average of WS137 (TCE $21,800 per day), rates hit their lowest average in September at WS82 (TCE $5,000 per day). In 2015, the lowest average recorded for this vessel class was WS107 (basis 2016 WS flat rates) or a TCE of around $12,400 per day.
The year ended on a strong note as rates eclipsed the WS180 levels upcoast and returns reached over $27,000 per day at their highest point.
It was a similar story in the UKC-Med market, as average rates dropped throughout the year before picking up as 2016 came to a close. This route started the year trading at an average of WS136 (TCE $27,000 per day) and hit an average of WS80 in October - its lowest point of the year (TCE $7,500 per day). A flood of inquiry in December sparked positive sentiment in this market and rates soared to the WS185 level (TCE $21,000 per day).