Asia Tankers-VLCC Steady After Bumping Four-Month High

Posted by Joseph Keefe October 7, 2016

Power struggle breaks out between between owners and charterers; West Africa cargoes hit a monthly record.

Freight rates for very large crude carriers (VLCCs), which surged to a four-month high on Thursday, to hold steady as ship owners await the release of November cargoes, ship brokers said on Friday.

"There's a power struggle going on between owners and charterers," said a European supertanker broker on Friday.

"Few charters were done on Thursday. There are no fresh cargoes out of the Middle East Gulf," the broker added.

That came as rates surged 10 points on the Worldscale measure in one day, equivalent to a more than $10,000 increase in daily earnings, the broker said.

Daily earnings are up by more than $16,000 in a week on VLCC charters from the Middle East to Asia, according to chartering data on the Reuters Eikon terminal.

With average breakeven costs of around $21,000-$22,000 per day, supertanker owners are now making a profit after Middle East-to-Asia earnings climbed to around $36,000 a day, shipping experts said.

"Next week should be quiet because owners are waiting for the Saudi Arabia cargoes," he added.

However, charterers may also release November cargoes early to secure vessels in the face of tight tonnage supply, ship brokers said.

"Rates could take a breather or roar," a European shipbroker said.

That came as VLCC soared to the highest level since mid-June, fuelled by a record number of VLCC tanker fixtures from West Africa and a raft of charters by Unipec, the trading arm of China's Sinopec.

"There were 33 VLCC cargoes from West Africa for October loading - that's a monthly record," the first European broker said.

That came after Shell lifted force majeure on Bonny light crude exports coupled with an increase in exports of Qua Iboe crude oil from Nigeria.

"The Chinese have been buying a lot of oil ahead of a probable rise in prices. Unipec has taken a lot of cargoes from the Middle East Gulf and West Africa, which is what's pushing the market," the broker added.

VLCC rates from the Middle East to Japan surged to around W55.50 on Thursday, from W38.25 last week, the highest since June 10. That was an increase in daily earnings from $19,961 to $36,000.

Rates for VLCCs from West Africa to China climbed to W55.50 on Thursday, against W50 on the same day last week.

Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia were almost unchanged around W65.75 on Thursday, from W66.75 last week.