Tanker rates hit new heights

Oct 18 2019

Last week Clarkson Research cross-sector earnings index, ClarkSea, recorded its biggest ever weekly percentage move.

The index rose by 23% to average $20,096 per day. This week saw another record, including the biggest absolute increase (55% to $31,207 per day).

The spike was very much tanker driven (VLCCs on $307,888 per day. The tanker element of the Index shot up 323% over two weeks to $80,255 per day, exceeding the previous all-time high recorded in November, 2007.

Clarkson’s average VLCC spot earnings series moved even more spectacularly, up 516% from $50,002 per day to $307,888 per day.

For some time, the tanker market supply and demand projections have been encouraging, with 5% tonne/mile demand growth projected for next year, boosted by IMO 2020 changes to refinery throughput and oil product trading patterns, alongside 2% fleet growth - reduced by crude tankers in repair yards being scrubber retrofitted, 2% at the end of September

So, heading into the seasonally strong winter, there were some building blocks already in place for an improving tanker market, Clarskon said.

But as widely reported, it was the US sanctions impact on selected subsidiaries of the world’s largest (3.8% of global tonnage) shipping group and largest (3% of tonnage) oil tanker group that sent the market into a frenzied scramble to secure tonnage.

Further reports of other sanction-related chartering clauses related to Venezuela have added to the confusion, creating additional ingredients for this spike and the owner’s bullish position. The market is now also trying to digest the news of another Middle East tanker attack, while a major Japanese typhoon over the weekend has also added to the disruption.

Aside from the recent frenzy, the Index has been making broader progress, up for five consecutive months for the first time in a decade and trending up year-on-year since 2016.

That seems mundane compared to the past two weeks but perhaps more comforting in the longer term, Clarkson said.

The rates have fallen back since but were still healthy by mid-week at around $135,000 per day (see Markets story below).

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