Markets---Owners in the driving seat

Nov 03 2018

Strong volumes over time, combined with a typhoon or two, have worked wonders for VLCC market sentiment.

MEG/East reached the WS100 mark with WAfrica/East coming just below. This has pushed earnings close to $50,000 per day, levels not seen for a long time, Fearnleys reported.

Owners were firmly in the driving seat as volumes for almost all the major VLCC routes continued to be active whilst tonnage availability in the near term appeared to be thinner than seen for a long time.

However, risks to the upside for rates prevail.

As for Suezmaxes, the upward momentum in the West African market plateaued at the back end of last week as activity tailed off at the end of the 2nd decade.

Meanwhile, the Med and Black Sea market sentiment remained firm on the back of inclement weather in the UK/Cont and Med regions, delaying ships and causing replacement business at inflated rates over last fixed.

Owners were reluctant to fix ships to the Far East thus potentially missing out on continued market upside with the result that premium rates were insisted upon for east destinations further driving rates upwards.

We are entering the period where Black Sea delays tend to increase and that should keep this market moving in the coming weeks.

Aframax rates in the North Sea and Baltic saw a small downward correction at the beginning of this week, mainly due to lack of activity. Some owners accepted lower rates to minimise waiting days to their vessels.

However, surrounding markets offering an alternative combined with bad weather in the area gave owners sound negotiation power and rates were again firming.

In the Med and Black Sea, we have seen a bit of a roller coaster this week. Everyone expected the market to come off, due to more ships available in the area coupled with cargo dates that had been worked quite far forward.

We saw WS165 done for both cross-Med and BlackSea/Med. But then the bad weather arrived, resulting in a lot of closed ports and uncertain positions. This pushed the market back up at WS180.

Fearnleys believed that the market will remain around the current levels for the rest of the week.

In a boost to US crude exports, the Port of Corpus Christi Authority has signed an agreement with the Carlyle Group to develop a crude oil export terminal on Harbor Island.

This will be the first onshore location in the US capable of handling fully-laden VLCCs.

Under the terms of the agreement, the port will work with Carlyle to bring together oil producers, marketers, pipeline operators and marine terminal operators.

Carlyle has agreed to lead the construction and ongoing operations of the terminal on an exclusive basis. The company will arrange for private funding for a dredging project to bring fully-laden VLCCs to Harbor Island, making the main channel at least 75 ft deep.

The terminal will include at least two loading berths on Harbor Island, as well as crude oil tank storage inland across Redfish Bay on land secured by Carlyle. 

The project is still subject to agreement on definitive documentation between the parties, satisfactory completion of due diligence and final approval from Carlyle’s investment committee.

The terminal is expected to be operational by late 2020.

In the charter market, brokers reported that Mercuria had fixed the 2018 VLCC ‘Maria P Lemos’ for 12 months at $31,500 per day, while Solal took the 2010-built LR2 ‘Gstad Grace’ for 12 months at $15,000 per day and Vitol reportedly fixed the 2009-built LR2 ‘Ohio’ for 12 months at $14,750 per day. 

In a finance deal, Shandong Shipping has purchased five 2012-2013-built VLCCs and four 2009-2010-built Aframaxes from Brightoil on a bareboat charter back basis.

BP has reportedly sold three 2006-built Aframaxes to Union Maritime for $13.7 mill each, while Transocean Maritime was said to have purchased the 2010-built MR ‘Pacific Vega’ for $16.35 mill.

Eastern Pacific was said to have ordered two Aframaxes at Hanjin Subic for $50 mill each for 2020 deliveries. They will be scrubber fitted to Tier III. In addition the company has declared options for two more MRs at Onomichi for 2020 deliveries, plus 20,000 dwt stainless steel chemical tankers in Japanese yards.  









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