Markets - Sharp crude rate increase seen

Sep 08 2017


VLCC activity, particularly from MEG, increased sharply during the last few days.

True to form, the majority were fixed off market, Fearnleys said. Owners’ resistance was stronger, which stopped the rate slide and led to a slight increase. However, tonnage was still in abundance and it will take both time and effort to strengthen rates further.  

 

WAfrica/East proved to be following a similar pattern and rates came off the lows with last done at WS50.

 

Suezmaxes also finally found some positive news last week impacted by the uncertain itineraries for many ships, due to Hurricane ‘Harvey’ and a number of vessels being chartered in to replace Aframaxes that were compromised by the storm.

 

As a result, sentiment rallied and TD20 rates climbed to WS72.5. Charterers reacted by sitting back to try to dampen enthusiasm thus creating a quiet end to last week.

 

However, as this week progressed, we have seen the market stabilise, as charterers patience paid off and the tonnage lists reflected a build-up of new candidates to cover current requirements, Fearnleys said.

 

The outlook for the week ahead is balanced, but if the Caribbean market tightens up with the approaching second Hurricane ‘Irma’, the West Africa market will likely experience a secondary rally giving owners the impetus they need to capitalise.

 

North Sea and Baltic followed their neighbours and started the journey towards a brighter future. Baltic crude cargoes were only being covered 10 days ahead and we would expect charterers to do a bit of shopping prior to this weekend, Fearnleys said. Both markets should continue to firm on the back of pure sentiment.

 

In the Med and Black Sea, rates have moved up to a more sustainable level. A tighter tonnage list, higher cargo activity, and owners that have been waiting for this scenario for almost two months, caused this increase.

 

There were and still are prompt ships around, but owners have held back, which resulted in WS100 being achieved several times. Unfortunately, there are still some prompt ships around and dates are now fixed far forward. Hence, owners will need to gear up for a fight to keep the rates at three digits, Fearnleys concluded. 

 

According to Reuters, despite some US Gulf refineries and pipelines reopening after Hurricane ‘Harvey’, on Tuesday of this week, around 3.8 mill barrels per day of capacity remained shut, reported Ocean Freight Exchange (OFE).

 

Refinery outages led to to a hike in jet fuel and gasoline shipments from Asia to the US and Latin America, following the hurricane.

 

Charterers played safe by adding multiple discharge options, including USWC, USCG, WC Mexico and Peru. Around 865,000 tonnes of CPP was tentatively booked from Asia since 25th August. By comparison, around 375,000 tonnes was fixed for August loading before ‘Harvey’, while July volumes totalled 675,000 tonnes.

 

While cargoes from Asia are typically shipped in MRs, some LR1s were also fixed, OFE said. MR rates from South Korea to USWC basis 40,000 tonnes rose by $150,000 week-on-week to $1.15 mill, while rates from South Korea to Singapore went up by $20,000 from last week to $350,000.

 

Overall, sentiment in North Asia remained firm as there were a number of inquiries outstanding for transpacific cargoes. However, a number of tanker fixtures failed on subjects, which continued. Some ships were released as traders rushed to fix the vessels before they had the cargoes, while others failed to find a buyer as key USGC refineries resumed operations, alleviating concerns about supply shortfalls.

 

Out of the 865,000 tonnes moving from Asia to the Americas, at least 395,000 tonnes was jet fuel fromSouth Korea and Singapore bound for the USWC, as this area’s jet prices had settled around $78 per tonne higher that the Singapore jet prices, making the arb profitable.

 

USCG shipment delays has left Latin American buyers with no choice but to turn to Asia for gasoline imports. One of the largest buyers of USCG gasoline, PMI, had provisionally booked at least two MRs to lift gasoline from South Korea and Singapore to WC Mexico, OFE concluded. 

 

Later this week, product tanker rates softened but all eyes were on Hurricane ‘Irma’, which was due to hit the Florida coast and going further up the USEC this weekend. 

 

In other news, NAT has confirmed that another Suezmax has been fixed to an oil major on a long term contract.

 

The unnamed Suezmax was fixed to BP for two years at a rate described as well above the cash break-even level of around $12,000 per day with an index linked formula providing for upside potential to NAT.

 

The charter will commence in mid-September.

 

NAT said that it now had five vessels on longer term contracts with major oil companies worldwide, including ExxonMobil and Shell. In addition, NAT has shorter contracts with other major energy companies in the East and in the West.

 

Other charters reported recently included the 2016-built Suezmax ‘Goldway’ said to have been fixed to Phillips66 for $18,000 per day and the 2010-built Aframax ‘Stealth Novic’ thought taken by Maersk for 12, option 12 months, at $13,000 per day.

 

Clearlake was thought to have fixed the 2017-built MR ‘Maersk Cancun’ for 12 months at $14,750 per day, while Trafigura was said to have taken the 2003-built Handy ‘Pioneer’ for 12 months at $11,500 per day. 

 

In the S&P sector, Sinokor was believed to the buyer of the 2002-built VLCC ‘Nichinori’ for $22 mill, while Coral Shipping was reported to have taken another LR1, the 2003-built ‘Jill Jacob’ at $10 mill, while the 2007-built LR1 ‘King Dorian’ was thought sold to Norstar Tankers for $14.5 mill.

 

Newbuildings also hit the headlines this week with VLCCs leading the way.

 

NYK was said to have ordered three VLCCs at JMU and another at Nippon for 2019-2020 deliveries, while Daewoo filed a stock exchange statement saying it had won orders for five VLCCs, plus another five options, from Hyundai Merchant Marine (HMM) in a Won negotiated deal worth around $420 mill in total, or about $84 mill per vessel.

 

Chinese leasing bank BoCom FL reportedly firmed up options for four Suezmaxes at Hyundai Samho for $51.5 mill each, while Letters of Intent (LoI) were believed signed by Hellespont for four MRs at COSCO.  

 

Finally, Dutch-based coastal shipping company, Thun Tankers, has declared an option.

 

 

The five vessels, which will be delivered between 2019 and 2020, will enter the Gothia Tanker Alliance network. They will all be built at China’s Avic Dingheng Shipbuilding. 



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