Asia VLCC Rates Could Could Climb Even More

Posted by Joseph Keefe November 28, 2014

Owners see rates climb by nearly $22,000 per day; Rates could peak as more tonnage comes free.

Rates for very large crude carriers (VLCCs) on key Asian routes could nudge higher amid a flurry of new cargoes and tighter tonnage supply that propelled rates to their highest in nine months, brokers said.

Freight rates from the Middle East to Japan gained more than 13 points on the Worldscale measure in the past week, equivalent to an increase in earnings of almost $22,000 per day, according to Reuters freight data.

Brokers said tonnage is tight for cargoes to be fixed in mid-December which could push rates higher although there are more VLCCs available later in the month which could cap the potential for a further surge in rates.

VLCC rates were buoyed this week after charterers fixed the supertankers to co-load cargoes that would normally be moved on smaller Suezmax tankers because Suezmax rates were also very firm.

"Suezmax prices have fallen so there has not been too much co-loading on VLCCs in the last couple of days," said a Singapore-based VLCC broker on Friday.

"I think VLCC rates could go up another point or two. I don't think the market will keep raging forward," the broker said.

"Some people are saying rates could be peaking. Even if the market stops going up it's not ready to come crumbling down," said Kevin Sy, a tanker derivates broker with Singapore's Marex Spectron.

There were around 60 VLCC cargoes from the Middle East still to be fixed for December, assuming there would be 130 fixtures for the month, Sy said.

"Tonnage is very, very tight for liftings in the middle of December," the Singapore broker said.

There is more tonnage available for the last 10 days of the month so rates were likely to soften, the VLCC broker said.

But with the Brent oil price now 40 percent lower than July, there could be more VLCC fixtures as refiners bought oil for storage, the Singapore broker said.

VLCC rates for the benchmark route from the Middle East to Japan climbed to almost W64.50 on Thursday, up from just under W51 a week ago, the highest since Feb. 18. Rates are the equivalent of nearly $60,500 per day.

Rates for West Africa to China were close to W61 on Thursday, against W54 last week, also the highest since February.

In other trades, rates for 80,000-tonne Aframax tankers from Southeast Asia to East Coast Australia climbed to close to W119 on Thursday, compared with W115.5 a week earlier. But they had started to soften as cargo demand and tonnage supply became more closely matched, an Aframax broker said on Friday.

Clean tanker rates from Singapore to Japan were weakening after slipping to under W121 on Thursday against W121.75 last week.