Tanker rates collapsed towards the end of last week as owners rushed to fix cargoes and move their Very-Large-Crude-Carriers (VLCCs) away from the Mideast Gulf where idle capacity was rapidly mounting.
Brokers said they remained optimistic that rates would soon recover. "Last week proved to be another disappointing week for owners," said Oslo broker Lorentzen & Stemoco (L&S). "A modest rate increase is expected in the near future, as charterers receive confirmation of their June programs."
The slump, which took the market back to 15-month lows of around W54 ($0.94 per barrel) for eastbound cargoes, was triggered by Far Eastern majors putting surplus capacity on the spot market while it was not needed during refinery maintenance programs.
Owners of these "re-lets" had undermined the market by failing to stand their ground in negotiations, brokers said.
"The re-lets did the damage, and now they've taken the cargoes and moved away," a London broker said. "Now other tonnage is piling
up, and charterers are beating these owners down on rates."
On Friday, London broker Gibsons estimated that 77 VLCCs would be available in the Mideast Gulf over the next 30 days, while L&S put the figure at 81. "With the expectation of strong demand next week it will be interesting to see whether owners take the initiative and reverse the present trend." Rates to the U.S. Gulf fell to W55 ($1.55 per barrel) on Thursday, but have since started to recover slightly.
Million-barrel tankers continued to lose out in all markets as charterers opted for the cheap VLCC tonnage wherever possible.
"Last week, rates out of West Africa were held down by VLCC tonnage in the market," L&S said. "This week we have seen a further fall in rates spurred by the low activity level."
It put freight from West Africa to the U.S. Gulf at W75 for VLCCs ($1.09 per barrel) and W107 ($1.41 per barrel) for million-barrel tankers, but it said that if million-barrel rates fell further they would start to become attractive again.
Mediterranean markets lost 10 points last week to fall below W120 ($0.67 per barrel), while North Sea transatlantic markets lost 20 points last week to reach W105 ($1.08 per barrel). - (Reuters)