Tanker Markets Move Forward, Slowly

Monday, July 23, 2001
Most tanker markets were still inching forward on Monday but the North Sea market was at the end of its rally and was starting to sag again, brokers said. "It's cooled off a little (in the North Sea), but we're hoping it won't fall too much further -- certainly not back to last month's levels," said a London broker. On Friday, shipping brokers Gibsons reported a weakening in North Sea tanker demand during the week and the prospect of further softening to come. "Thinner enquiry from the North Sea resulted in Aframax (70-80,000 tonner) rates softening to around W160 ($0.85 per barrel) for inter UK-Continent voyages and this downward trend will probably continue next week," it said in a market report. Rates for similar ships in the Caribbean stayed level at W125 ($0.89 per barrel), while those in the Mideast Gulf and Asia strengthened to W150. The Mediterranean, however, struggled to keep earnings bouyant. "Aframax enquiry in the Med has slackened off and rates are back down by about 10 points to W150 ($0.72 per barrel)," said a London broker. Gibsons said the million-barrel sector had also suffered in the Mediterranean, undermined by lack of enquiry for sailings from Ceyhan. On Monday the market stood close to W100 ($0.56 per barrel). Brokers said million-barrel ships were doing better in the West African market and were being booked for transatlantic cargoes at W125 ($1.65 per barrel), following a 15 point rally last week. But they said any further gains were likely to be capped by competition from VLCCs, which were doing similar routes at W63 ($0.91). Brokers said that VLCC operators had failed to make the most of strong demand, and that rates had only inched forward during the last week to around W54 for both eastbound ($0.91 per barrel) and westbound ($1.53 per barrel) cargoes. "It's the same old story with re-lets undermining the market," said one London broker, referring to oil majors' VLCCs that have been put on the spot market where they often fail to hold their own in freight negotiations. Gibsons was upbeat on short-term prospects. "Our present estimate of 56 VLCCs including only 26 modern units capable of loading from the Middle East Gulf over the next 30 days should enable real gains to be achieved in the coming weeks," it said. But Oslo broker Lorentzen & Stemoco sounded a warning for longer term prospects: "Is the VLCC market set for a comeback, bouncing back to last winter rate levels? Probably not, if the oil price continues to fall VLCCs are moving into shallow waters," it said in a market report. - (Reuters)
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