A resumption in Middle East oil exports to the U.S. is required to drag VLCC tanker rates off the floor, shipping brokers said.
A late start to seasonal westbound oil shipments from the Middle East is making tanker brokers ask when relief will arrive.
VLCC tanker rates out of the Middle East have nose-dived again in the last two weeks due to a lack of activity, to around W42 east (around $4 per ton) and west (about $7.00 per ton).
Even when there has been strong tanker demand from Asia over the last month, large tanker rates have failed to take off because of the lack of oil going west, brokers said.
"It is a simple formula. The Red Sea-East journey is much shorter than to the West, and allows a build up of vessels returning to the Middle East. The result is rates nose-dive," one broker said.
Broker E.A. Gibson said in its latest weekly report that up to 82 vessels of 23 million tons could become available in the Middle East over
the next four weeks.
"All the additional oil has been heading east," analyst Roy Mason
at Oil Movements said.
"There is only about four weeks left for westbound winter season cargoes to be fixed, so it's got to happen soon," Mason said.
"If it doesn't the winter will get very hectic," he added.
Surplus Shipping Capacity
The squeeze on U.S. imports has been tightened by the Brent/WTI arbitrage hovering at levels far too narrow to bring in incremental North Sea barrels over the last two months, according to oil traders.
The last VLCC to sail from Sullom Voe to the U.S. Gulf was the Atlantic Liberty, which loaded on Sept. 15.
Asian refiners have also been snapping up West African crudes - taking up to 1.2 million barrels a day in November and an expected one million a day in December, traders said.
Mason said the first signs of a swing towards increased Mideast-West sailings were beginning to show up in the quantities of seaborne oil.
Iraqi exports are also expected to resume on November 20 provided there is no delay to the implementation of the next phase of U.N. "oil for food" sales.
Brokers reported on Tuesday a VLCC fixture to the U.S. Gulf from Iraq for September 19 going to Russian trader Ursa.
However, longer term most brokers said any recovery in rates will remain limited because surplus shipping capacity will continue into next year.
Seven VLCC tankers have been reported sold for scrapping in the past two weeks, taking the total this year to 31, according to brokers.
But more ships need to be taken out of the market before a sustained recovery is possible, most analysts agree. - (Paul Berrill, Reuters)